You can close your limited company and open a new one, provided you follow the correct legal process depending on whether the company is solvent or insolvent.
- Closing and reopening is legal, but the route differs: solvent firms use an MVL or strike-off, insolvent ones a CVL or compulsory liquidation.
- After insolvent liquidation, section 216 bans reusing the old trading name for 5 years unless a narrow exception applies — breaching it is a criminal offence.
- Debts and personal guarantees stay put, and selling assets cheaply to the new company can be reversed by liquidators.
- HMRC's TAAR can tax your payout as income if you wind up mainly to cut tax and carry on similar work within 2 years.
- PAYE, licences, insurance and bank accounts all restart; VAT numbers transfer only with HMRC's approval.
What are the different ways of closing a solvent vs an insolvent company?
| Company status | Available option | When it might apply |
|---|---|---|
Solvent | Members’ Voluntary Liquidation (MVL) | The company can pay its debts within 12 months. |
Solvent | Voluntary strike-off | A company has ceased trading and is eligible for removal from the Companies House register. |
Insolvent | Creditors’ Voluntary Liquidation (CVL) | A company cannot pay its debts, and its directors and shareholders wind it up. |
Insolvent | Compulsory liquidation | A company cannot pay its debts, and the court issues a winding-up order. |
Can I close a company and start a new one straight away?
Yes, and many owners incorporate the new company first so the business can continue while assets move across. The old company stays a separate legal entity with its own liabilities and filing obligations.
How can I strike off a company?
You can apply to have a company formally struck off the register unless, in the last 3 months, it has traded, sold stock, changed its name, faces liquidation or has creditor agreements. Otherwise, it must be liquidated.
Submit Form DS01 with the fee, then within 7 days, send a copy to non-signatory directors, shareholders, employees, pension trustees and creditors. If nobody objects within 2 months of the Companies House notice in The Gazette, the company is dissolved.
Can I reuse a company name after liquidation?
If you were a director of a company at any time in the 12 months before it entered insolvent liquidation, section 216 of the Insolvency Act 1986 prohibits you from using any name the company was known by or traded as in the 12 months before liquidation, or one that suggests a link, for 5 years.
Part 22 of the Insolvency (England and Wales) Rules 2016 sets out three exceptions:
- Obtaining court permission. If you submit an application within 7 business days of liquidation, you can use the name pending a court decision for up to 6 weeks.
- Acquiring the whole or substantially the whole of the business through the insolvency practitioner, notifying every known creditor and publishing notice in The Gazette before using the name and within 28 days of sale completion.
- Using a name that a separate, active company has held continuously for the 12 months before liquidation.
Breaching the restriction is a criminal offence and can make you personally liable for the new company’s debts. It applies only after insolvent liquidation, not dissolution.
Can any director start a new company?
A disqualified director cannot form, manage or promote a company without the court’s permission. Doing so is a criminal offence. Under the Company Directors Disqualification Act 1986, disqualification can last up to 15 years for a director found to have engaged in unfit conduct or fraud. Breaching its conditions can result in fines or up to 2 years in prison.
Do debts and registrations move to the new company?
Debts stay with the old company, and personal guarantees stay with you. Selling assets to the new company significantly below their value risks challenge from liquidators or administrators under section 238 of the Insolvency Act 1986. The court will not reverse the sale if it was made in good faith, for business purposes, and with a reasonable expectation the company would benefit.
Pay As You Earn (PAYE) registration, licences, insurance, contracts and bank accounts must start afresh. Uniwide Formations helps map out these requirements when forming a new company.
What tax liabilities are there if I close my limited company and open a new one?
The Targeted Anti-Avoidance Rule (TAAR) may apply where you wind up a company to reduce income tax and continue in a similar trade. It can apply where the following conditions are met:
- You held at least 5% of the company at the time of winding up.
- The company was a ‘close company’ (controlled by 5 or fewer participators or any number of director-shareholders) at the time of winding up or within 2 years before.
- Within 2 years of the distribution, you engage in the same or a similar activity – as a sole trader, in a partnership, through a company in which you hold at least a 5% interest or in a business carried on by someone who is connected to you.
- One of the main purposes of winding up is to avoid or reduce income tax.
If the TAAR applies, distributions will be taxed as income. If it does not, any distributions from an MVL attract capital gains tax.
On a strike-off, distributions of £25,000 or less are treated as capital under section 1030A of the Corporation Tax Act 2010, provided dissolution occurs within 2 years of payment. The company must pay all debts and collect, or intend to collect, all money owed to it. If these conditions are not met, or if distributions exceed £25,000, the entire amount is taxed as income.
What happens to the old company’s tax and VAT?
You must file final accounts and a tax return up to the final day of trading, including profits from assets sold to the new company. A VAT number can transfer if the business can continue as a going concern, both companies agree and HMRC cancel the old company’s VAT registration from the transfer date. The new owner must not be VAT-registered and must become liable or entitled to register from the transfer date.
If the old company has unpaid VAT, penalties or interest, or outstanding appeals against any, HMRC are likely to refuse the transfer. If approved, the new company becomes responsible for the first and any outstanding VAT returns, including VAT due on sales the old company made before the transfer.
HMRC may issue joint and several liability notices in cases involving repeated insolvency and unpaid tax.
Tags: Limited Company
