Closing or winding down a UK subsidiary

Planning how you would leave a market is part of governance. Most UK subsidiaries that close do so tidily and cheaply. The ones that become expensive are the ones where the parent stopped funding the company before anyone worked out what the company still owed.

First question: is the company solvent?

If the company can pay everything it owes, including redundancy, the final tax bills and any lease, it can be closed by striking it off the register, which is inexpensive. If it cannot, the directors' duties change: at the point insolvency becomes unavoidable the duty shifts towards the creditors, and continuing to trade can make the directors personally liable. It is a licensed insolvency practitioner's territory. Insolvency work is excluded from an AAT licence, so Buzz does not do it. What we do is tell you which situation you are in, early, and introduce a practitioner while there are still options.

Closing a solvent subsidiary

1. People first. Notice, redundancy pay where it is due, final payslips and P45s. UK redundancy has a process and, above certain numbers, a consultation period with its own timetable. Getting this wrong is the most common source of a claim after closure.
2. Customers and suppliers. Contracts terminated on their terms, debts collected before anyone knows the company is closing, which is much easier than after.
3. Assets to the parent. Transferred at a defensible value, because a transfer at undervalue is both a tax problem and, if the company later proves insolvent, a reversible transaction.
4. Final accounts and returns. A final set of accounts, a final corporation tax return, the last VAT return and deregistration, and the PAYE scheme closed. In that order, because HMRC will object to a strike-off where anything is outstanding, and an objection stops the process.
5. Cash out. Remaining reserves distributed to the parent. Above a modest threshold, taking the reserves out as a distribution on a strike-off is taxed differently from a formal liquidation, which is worth checking before the money moves.
6. Strike-off. The application, the two-month notice in the Gazette, and the company dissolved. Anything left in the bank account at dissolution goes to the Crown, so the account must be emptied first.

The alternative: pause it

Where the group may return, making the company dormant is far cheaper than closing it and keeps the name, the registration history and the Companies House record intact. Reviving a struck-off company is possible but slow and involves a court. If there is any real chance of coming back within a few years, dormancy is usually the better answer, which is covered on the dormant subsidiary page.