It is not unusual for contractors to take time out, either for an extended holiday, to carry out a period of research and training, or if new work is hard to find. You may even have decided to take a permanent job. So, what should you do with your limited company if you do decide to take a break from contracting?
Here, specialist accountants InTouch Accounting, explain the practical steps you need to take if you have been trading via your own company.
What to do with the company itself
If you are taking a new permanent position then consider whether you want the company to remain in existence. If it is unlikely that you will return to contracting and having considered the use of any money left in the company then one option is to close the company permanently.
Company closures are relatively easy but time-consuming. It’s not unusual for a company closure to take six months or more. Your accountant can advise on your specific circumstances.
However, if you decide that you want to retain your company for the future there are some simple things to keep the cost of compliance to a minimum.
VAT and PAYE
De-register from VAT to avoid having to submit nil returns. But watch out for any VAT you will need to pay on assets held in the company on which you reclaimed VAT, even if you are on the Flat Rate Scheme. If you are on cash accounting then you may need to pay VAT on your unpaid invoices.
Issue a P45 to yourself and other employees such as your spouse and close your PAYE scheme to avoid having to issue RTI submissions every month.
Don’t forget to consider any benefits in kind, these will still need to be reported for the current tax year.
Other considerations
Make sure you have claimed all your business expenses and have worked out what taxes remain payable. You can then decide what to do with any remaining cash.
Your company will still need to file accounts to Companies House and send HMRC a Corporation Tax Return for each accounting year-end the company continues to exist and Companies House will still require an Annual Return.
As a director, you are still responsible for the company’s compliance and keeping accounting records.
Discuss your options with your accountant to keep your professional fees to a minimum, and consider whether your bank charges could be avoided in the future.
Recommended Contractor Accountants
- SG Accounting - Join SG and get first 3 months @ £59.50pm
- Clever Accounts - IR35 FLEX. Take on any contract you're offered
- Aardvark Accounting - Complete service just £89/month
- Integro Accounting - 6 months fixed fee accountancy service half price!
Open a Which? Recommended ii SIPP - just £5.99/month fee
