A company legally ceases to exist when it is dissolved or struck off the register at Companies House by the Registrar of Companies.
One of the simplest and most cost-effective ways to close a company—particularly one that is no longer trading and has minimal assets—is through a voluntary strike-off. The current fee to file a DS01 form is £33 online or £43 by post, making it significantly more affordable than undertaking a formal liquidation.
The Legal Framework
The relevant provisions are set out in the Companies Act 2006, which allows for strike-off in two key circumstances:
- Section 1003 – Voluntary Strike-Off
A company may apply to be struck off via a majority decision of its directors. This route is only available to companies that are no longer trading and have no ongoing legal proceedings or insolvency actions. - Section 1000 – Compulsory Strike-Off
The Registrar of Companies may initiate a strike-off if there is reason to believe the company is no longer carrying on business—for example, if it fails to file accounts or confirmation statements, or doesn’t respond to official correspondence.
The Process for a Directors’ Voluntary Strike-Off…
1. Board Resolution
Convene a board meeting and pass a resolution confirming the intention to strike off the company. The board minutes should record that all debts have been or will be settled, and that the company has ceased trading.
2. Settle Final Tax Matters
- Submit the final Corporation Tax return and company accounts to HMRC
- Deregister the company from VAT and PAYE
- Send a letter to HMRC (ideally by recorded delivery) explaining that the company has ceased trading and intends to apply for strike-off
3. Submit Form DS01
- File Form DS01 online (£33) or by post (£43)
- The form must be signed by the directors
There is no requirement to file final accounts with Companies House as part of the DS01 process.
4. Notify Stakeholders
A copy of the DS01 form must be sent to all relevant stakeholders, including:
- Employees
- Creditors and suppliers
- HMRC
- Landlords
- Pension providersKeep a record of all parties notified and copies of correspondence sent.
5. Gazette Notice and Objection Period
- Companies House will acknowledge the application and publish a notice in The London Gazette
- Interested parties have two months to object
- HMRC will also receive a copy of the application
If no objections are received, Companies House will publish a second Gazette notice confirming that the company has been dissolved and the register will be updated.
Can a Company Be Struck Off If It Has Unpaid Debts?
Yes – in certain circumstances. A common misconception is that a company must be entirely debt-free to apply for strike-off. In reality, there is no legal requirement under the Companies Act 2006 that all third-party debts must be cleared before applying.
The law does not prohibit strike-off where small or residual debts remain, provided the directors:
- Make a genuine attempt to settle all known debts
- Notify all known creditors of the intention to strike off
- Understand that creditors may object
- Do not abuse the process
When Might It Be Appropriate?
Strike-off may still be a practical option if:
- The total debt is low (e.g. under £10,000)
- Creditors are unlikely to take further action
- HMRC obligations have been addressed as far as possible
- The directors are acting responsibly and in good faith
If creditors do not object within the two-month Gazette notice period, the company can be dissolved even if modest debts remain.
Proceed With Caution
While strike-off is legally possible in these cases, directors should consider the potential consequences:
- Objections may delay or stop the strike-off
- The company may later be restored to the register by a creditor seeking payment
- Directors’ conduct may be reviewed if creditors suffer loss or allege wrongdoing
If in doubt, or if the debts are more than modest, it is wise to take professional advice before proceeding.
What Happens if There Are Objections?
If a creditor—especially HMRC—objects during the Gazette notice period, Companies House will suspend the process. This often results in a stalemate, unless the creditor proceeds with enforcement action or winding up.
If There Are Outstanding Debts…
Significant Debts
If the company owes substantial sums or is under creditor pressure, a voluntary strike-off is not appropriate. A formal liquidation may be required. Please contact me if you are unsure.
Small, Dispersed Debts
Where debts are small and owed to multiple parties, directors may decide to let the company remain dormant and wait for Companies House to strike it off under section 1000. This process can take a year or more but is sometimes a practical route where no active pursuit is expected.
Bear in mind that HMRC is far more likely than a trade creditor to initiate compulsory liquidation.
Tax Treatment of Distributions to Shareholders
Strike-Off vs Liquidation
- Strike-Off
Distributions made before strike-off are treated as capital gains, but only up to a limit of £25,000.Any amount above this is taxed in full as income. - Members’ Voluntary Liquidation (MVL)
If the company goes through a solvent liquidation, all distributions can be taxed as capital.
This can lead to significantly lower tax bills, especially if Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) applies.
Example:
If a company has:
- Share capital: £100
- Distributable reserves: £39,900
Then:
- The £100 is treated as a capital gain
- The entire £39,900 would be taxed as income if paid out on strike-off, as it exceeds the £25,000 threshold
To achieve full capital treatment, the company would need to go through a Members’ Voluntary Liquidation.
Additional Tax Risks
If the company is not dissolved within two years of making a distribution – or if it fails to pay all debts- HMRC may reclassify the distribution as a dividend, taxable as income.
Some directors consider paying a dividend to reduce company assets below £25,000, intending to strike off the rest as capital. However, HMRC may challenge this under CTA 2010 s1030A and tax the whole amount as income.
Final Thoughts
Strike-off can be a highly effective and affordable method of closing a company – but only if used in the right circumstances and with care.
Even where modest debts remain, the law permits strike-off, provided creditors are notified and there is no deliberate avoidance. However, directors must be alert to the risks of objections, reputational harm, and unintended tax consequences.
If you’re unsure whether strike-off is appropriate, or need advice on alternative closure routes, I’m here to help.
Call me on 01902 672323 for a confidential and straightforward chat about your options.