Moving from contract work to full emplyment - wind up Ltd company or leave dormant?

Discussion in 'Finance, Property, Law' started by 4(T), Oct 31, 2011.

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  1. My sister has been working as an HR consultant for a couple of years, and thus had to go through the rigmarole of setting up a Ltd company and filing the appropriate HMRC returns, etc.

    She has now started work three days per week as an employee of a company, and expects to become full time in due course. However, she is concious - like the rest of us - of the very insecure nature of jobs these days, and wonders whether she might be forced to go back to consultancy/contractor type work in the future.

    Question is, what does she do with her Ltd company, as of course it still requires tax returns and accounting fees even with no income coming into it?

    My sister's accountant has advised her to wind-up her existing Ltd company and close the bank account, but says this will cost c.£800. My sister wonders whether its best to make the company dormant, but realises that this will still attract HMRC interest and thus the headache of filing returns, etc.

    What have others done in this circumstance?

    The trouble is, it seems to me that employment and tax law has completely failed to adapt to modern working practices, and the fact that people often have to switch their types of employment several times within a year or two. I myself have turned down all forms of self-employed work, after suffering a two-year HMRC nightmare following a short period of contractor work....
     
  2. walkyrie

    walkyrie Old-Salt Book Reviewer

    £800 sounds incredibly cheap if she's planing on formally winding up the Company (i.e. put it into liquidation.)

    Ultimately if she just neglects the Company it will be struck off at Companies house. But if she's got any unpaid bills then people can object. And she'll need to get everything out of the Company first.

    If she does need it again, then she can just buy another off the shelf Company for a pittance and start again. Even if the Company was dormant she would have to de-register for VAT etc, so restarting Dormant Co and starting again involve the same rigmorale.
     
  3. It should cost £10 to companies house to strike the company off the records, and file it as closed. At least that's what my accountant has charged me.

    Closing the bank account is easy, write a letter to the bank stating that you want it closed. Job done.
     
  4. Sympathetic_Reaction

    Sympathetic_Reaction LE Book Reviewer

    personally I've seen a number of contractors go permenant then get sacked and go back to contracting at my current location that i would be hesitant in closing down the company, can't it be registered dormant or similar?

    S_R
     
  5. Unless she is genarating over £75,000 as a company, then she shouldnt need VAT Registration, or to be a Ltd company (next Time) look into operating as a Sole Trader. But if she is going dormant then wht would she need an accountant to file no returns, easy to see on the net in doing your own accounts.
     
  6. Filing returns for a dormant company is a piece of piss. If you'd really rather not, most of those 'company registration' warehouses will do it for a small flat yearly fee.
     
  7. that depends on what she does. If she's an IT consultant it needs to be a ltd company.

    It costs £50 to create a company, and nothing to open a bank account. I'd close the company down rather than leave it dormant.
     
  8. Rod924

    Rod924 LE Reviewer

    Firstly, her accountant is taking the piss!£ 800 kerr ching. So, firstly, mag to grid the bean counter. Now:

    She gets the forms from companies house to make the company dormant, about£ 25. But, she will need to file accounts each year at £ c 100. Basic p& l, nil values. This can be done in excel and used every year there after. If she plans to trade again, then worth doing

    As well as tax breaks, the debt belongs to the company; sole trader is responsible!

    If, she does not wish to trade again, then get the forms to dissolve (not liquidate) the company, about £ 75

    Been there, done it, so pm me if you want anymore details



    Sent from my GT-I9000 using Tapatalk
     
  9. I wound my company down 2 months ago. 1 cheque for £10
     
  10. Move it to a dormant company just in case? I have two Ltd companies. One is active and one is dormant. The dormant one costs about £25 per year. At £800 for an accountant to wind up a company, change the accountant.

    This year, it cost me a quarter of that for my active company accounts. Admittedly, there was a minimal amount for the accountant to do but even so, still way less than £800. Bear in mind in this day and age, most of the accountants work for companies house, the tax man and VAT ect is done online.
     
  11. Thanks all; I'll pass on all of these comments to my sister. It seems best to make the company dormant and close the bank account. I have a feeling the wind-up costs are so high because she used one of these admin companies to set up and run the thing for her when she first started as a contractor.