When a limited company is no longer required, dissolving it through a voluntary strike-off offers a simple and cost-effective method of closure. This procedure, governed by the Companies Act 2006, avoids the complexity and expense of a formal liquidation. However, directors must follow a strict process and be aware of the significant tax implications, particularly concerning the distribution of final assets.
The Voluntary Strike-Off Process
The voluntary strike-off procedure is a formal request to the Registrar of Companies to strike the company’s name from the register. It is intended as a simplified measure for private companies that have ceased trading and are no longer needed.
1. Eligibility and Application
An application to strike off a company must be made on its behalf by its directors, or a majority of them. The process begins with an online strike-off application or form DS01 filed with Companies House. From 1 February 2026, the fee is £13 online or £18 for a paper DS01; paper should be used only where the online service cannot be used.
The company generally cannot apply if, during the previous three months, it has traded or otherwise carried on business, changed its name, or disposed of property or rights for value that it previously held for disposal in the normal course of business. Activities necessary to conclude the company’s affairs—such as settling liabilities, complying with a statutory requirement or making the strike-off application—do not by themselves prevent an application.
A company is also prohibited from applying for strike-off if it is subject to formal insolvency proceedings. This includes being in administration, having a winding-up petition presented against it, or being subject to a Company Voluntary Arrangement (CVA). It is an offence for a person to make an application in contravention of these rules.
2. Notice and Objection Period
Once the application is accepted, the Registrar will publish a notice in the relevant Gazette (London, Edinburgh, or Belfast). This notice states that the Registrar may strike the company off and invites any interested party to show cause why this should not be done. If no objection is received within a specified period (typically two months), the Registrar will publish a final notice in the Gazette, at which point the company is dissolved.
Creditors, including HMRC, can object to the dissolution if they believe the company has outstanding liabilities or has not followed the correct procedure.
3. Duty to Withdraw the Application
Directors have a continuing duty to withdraw the strike-off application if the company engages in activities that make it ineligible. This includes trading, changing its name, or becoming subject to insolvency proceedings.
Critical Pre-Dissolution Steps
Before submitting a strike-off application, directors must carefully wind down the company’s affairs. This includes:
- Informing all interested parties, including shareholders, creditors, and employees.
- Ceasing all trading and business activities.
- Settling all outstanding debts and liabilities, including final tax bills.
- Closing company bank accounts.
- Distributing the company’s final assets to its shareholders.
This orderly wind-down is not merely good practice; it is essential for ensuring certain tax treatments apply to the final distributions.
Tax on Asset Distribution: The £25,000 Rule
The tax treatment of funds extracted from a company upon closure is a critical consideration. The rules distinguish sharply between distributions made during a formal winding-up and those made in anticipation of a strike-off.
- Formal Winding-Up: A distribution made in respect of share capital during a formal winding-up (e.g., a Members’ Voluntary Liquidation) is not treated as an income distribution for tax purposes. It is a capital receipt for the shareholder and subject to Capital Gains Tax.
- Anticipation of Strike-Off: Distributions made before a strike-off are, by default, treated as income distributions (dividends).
However, section 1030A of the Corporation Tax Act 2010 provides a crucial exception. A distribution made in anticipation of a company’s dissolution via strike-off will be treated as a capital distribution, provided two key conditions are met:
| Condition | Requirement | Legislative Basis |
|---|---|---|
| Condition A | At the time of the distribution, the company intends to satisfy (or has already satisfied) all of its debts and liabilities. | CTA 2010, s 1030A(4). |
| Condition B | The total amount of the distribution (or the total of all such distributions) does not exceed £25,000. | CTA 2010, s 1030A(5). |
If these conditions are met, the distribution is subject to Capital Gains Tax, which is often more favourable for shareholders than income tax on dividends. If the company fails to be dissolved within two years of the distribution, this capital treatment can be reversed.
This £25,000 threshold is a hard limit. If a company has distributable assets exceeding this amount, and shareholders wish to secure capital treatment, the company must enter a formal Members’ Voluntary Liquidation.
What Happens After Dissolution?
The publication of the final notice in the Gazette marks the end of the company’s legal existence.
Bona Vacantia
It is the directors’ responsibility to ensure all assets are dealt with before dissolution. Any property or rights belonging to the company immediately before it is dissolved are deemed to be bona vacantia (“vacant goods”) and pass to the Crown. This includes bank balances, property, and tax refunds. Once an asset becomes bona vacantia, it is difficult and costly to recover, often requiring a court order to restore the company to the register.
Continuing Liability
Dissolution does not extinguish the liability of the company’s directors, managing officers, or members. This liability continues and can be enforced as if the company had not been dissolved.
You may find further detailed guidance on the strike-off procedure on the GOV.UK website and within HMRC’s Company Taxation Manual at CTM36200 onwards..
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