If a contractor no longer needs their limited company (PSC), then they can close down their company and remove it from Companies House meaning it ceases to exist.  The process is quite simple and straight forward but if in doubt your accountant will be able to help.

Are you sure you want to close your PSC?

When IR35 takes hold in the private sector in April 2021 its unlikely most contractors will need their Limited Companies. Having said that if there is any doubt about future needs it can be made dormant until such a time it is definitely surplus to requirements.

Voluntary striking off and dissolution

As long as the company has not traded or changed its status in the previous three months and has only been used to supply the services of the contractor it can apply to be struck off.

Any additional shareholders or co Directors must be informed in writing and sent a copy of the strike off form

https://www.gov.uk/government/publications/strike-off-a-company-from-the-register-ds01

If the company is in financial difficulties it cannot apply for VSO and an accountant should be approached for guidance.

Closing accounts, tax return, payroll and VAT deregistration

Company accounts and the company tax return need to be prepared for the final period up to the final date of trading and submitted to HMRC.  A request to close down the corporation tax scheme should also be submitted.

The Tax Inspector for employer payroll should be informed that the company has ceased trading and HMRC will issue a final P35 Employer’s Annual Return. Any final balance of PAYE tax and National Insurance Contributions should be paid. https://www.gov.uk/stop-employing-staff

The company should be deregistered for VAT https://www.gov.uk/vat-registration/cancel-registration An accountant can help complete the final VAT return.

Final payments and closing the bank account

The last payments due to HMRC and creditors should be made from the company bank account. None of these payments should be associated with trading; otherwise the company cannot be struck-off. Remaining company assets such as cash and tangible assets such as office equipment can be paid to the shareholders as a final dividend.

If funds in the company are in excess of £35,000 then a Member’s voluntary Liquidation (MVL) is a tax efficient route of extracting the cash with only 10% tax paid. There could be Capital Gains Tax (CGT) liabilities arising from the final payments to the shareholders/contractor.

This summary covers the main points however before closing your Limited Company (PSC) you should seek independent professional advice.