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Our freeview 'At a glance' guide. How a company can cease trading? What options are available when trade has ceased and the owner wants to retire?

When a company ceases trading it can:

The route taken depends on the facts and circumstances of the case. Subscribers Click here for your detailed version of this guide.

See A sale of the company or its shares? Start here


Striking off 

Striking off is the process in which a solvent company is dissolved and struck off the Companies Register. It is often known as 'dissolution'.

Voluntary striking off:

See Striking off a company


Liquidation


Continuing as a non-trading or investment business


Remaining dormant


Extracting profits from the company prior to striking off

Purchase of own shares 

See Purchase of own shares/capital reduction checklist.

Dividends


Surplus cash on winding up

Many companies build up a surplus of cash over time. Excessive cash balances combined with other factors may affect:


Distributions made on striking off

Distributions made on liquidation

Distributions on winding up: TAAR and Transactions in Securities (TiS)

From 6 April 2016 the Transactions in Securities (TiS) anti-avoidance rules are extended to catch certain distributions on winding up:

From 6 April 2016, a Targeted Anti-Avoidance Rule (TAAR) was also introduced to target ‘phoenixing’. Distributions on a winding-up will be taxable as income if within two years the individual (or someone connected with them) carries on a similar trade or activity.

This expanded definition and TAAR will not extend to a Distribution on striking off, where the £25,000 limit mentioned above will instead apply.


Company/shareholder toolkits for ceasing trading

Cost effective tools to assist you through complex legislation:

Use the Virtual Tax Partner © TAAR tool to check whether your liquidation dividends are taxed as capital or income.

Use the Virtual Tax Partner © Business Asset Disposal Relief Toolkit to check whether your share disposal (if not affected by the TAAR) qualifies for Business Asset Disposal Relief (formerly Entrepreneurs' Relief).


Further advice and assistance?

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Need more help, please contact our Virtual Tax Partner Support service.


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