How do I shut down a business that isn’t making any money?

• I set up a second business but I now don’t think it’s worth continuing 
• How do I close my business and can I keep my website? Our experts answer 

I set up an e-commerce business as a sideline but have decided that it isn’t worth continuing with.

It is a separate business to my other business and I was running it by myself. I now want to voluntarily strike it off. I am considering keeping the website, however, in case I decide to start another business in the future doing something different but related.

I understand I need to not have traded for three months before applying to HMRC to strike off. 

Do I have to disable the website from public view, or can I put up a notice saying we’re not taking any more orders and disable the trading gateway?

Angharad Carrick of This Is Money replies: It’s harder than ever to run a small business, so it’s understandable why you’d want to close your second business if it’s proving more hassle than it’s worth.

Closing a business can be a stressful experience, especially if you’re running another one full-time.

It’s unclear whether you were operating this second business as a sole trader, but given you say you’d like a voluntary strike off, it is likely you were operating as a limited company.

You have a few options when it comes to closing your company but the first thing you should do is make sure you have tied up all the loose ends. 

This means settling any outstanding bills and collecting money owed, as well as informing HMRC your company is no longer trading so you’re not slapped with reminders for corporation tax.

If your company is solvent, there are two ways to dissolve your company: an informal or voluntary strike-off and members’ voluntary liquidation.

A voluntary strike off is when you choose to close your company, rather than a compulsory strike-off, when you’re forced to stop trading.

You need to submit a form to Companies House, but as you say, your company has to have been inactive for at least three months.

This means you haven’t traded or sold off any stock or changed names in the last three months, or been threatened with liquidation. You should also have no agreements with creditors like a Company Voluntary Arrangement.

If no objections are raised, Companies House will confirm the closure of your company in a public notice in an official public record when the three months have passed.

The key thing to remember is that you will need to transfer any company assets before you close it down, because once a company is struck off, any bank accounts are frozen.

Lauren Harvey, founding director at Full Stop Accountants and member of the Xero Partner Advisory Council replies: I like your suggestion of not taking any more sales and putting that note up on the website – messaging is often key in these things.

In terms of Companies House and striking off, as long as you don’t owe anyone after that three month non-trading period, it should be fine for you to continue.

However, if you do owe staff, HMRC (VAT and PAYE) or any suppliers, you need to make sure you contact them to explain and ensure they’re aware of the situation before that time, and confirm whether they have any objection to the strike off.

In addition to this, you will need to decide how to split any remaining assets like stock, bank balance etc., and remember the potential personal impact of this on your personal tax return before the final strike off date. 

Additionally, although no final accounts will be needed by Companies House, they will be required by HMRC along with the corresponding corporation tax return. You will also be required to keep all record for seven years.

These are just some pointers that will hopefully be helpful as a starting point, but it’s important to make sure you take advice from your own accountant, who will be able to offer more bespoke guidance suited to your situation.

Angharad Carrick adds: You should also consider the possible tax implications when closing your company.

Be aware that when you close down your company and take assets out of the company before it’s struck off you might have to pay Capital Gains Tax. If the amount is worth more than £25,000 it will be treated as income and youll have to pay income tax on it.

A voluntary strike off is a pretty simple process and if your profits are below £25,000 it is probably your best option. If retained profits are over that threshold then a members’ voluntary liquidation might be better from a tax perspective.

A members’ voluntary liquidation will close down your company and distribute the assets to shareholders in cash. You will need a licensed insolvency practitioner to manage this, though.

Instead of taking profits as a final dividend, which counts as income, the profits are distributed as a capital gain so is subject to CGT. The process is a lot longer and will take about a year from start to finish.

From what you’ve said, you’re unsure about what you’d like to do with the business as you might want to pick the website back up for another business.

You do have the option to make your company dormant, which means that while you’re not actively trading, you’ll still be listed on Companies House and you can pick it back up later on.

You’ll still need to file a tax return to show HMRC your company is dormant, but there is no limit to how long a company can remain dormant.