Limited companies (Scotland)

This fact sheet tells you about what you can do if your limited company has debts that it is struggling to pay. It outlines the solutions available and explains other important things to think about when running a limited company.

Use this fact sheet to:

• find out when you may be personally liable for your limited company’s debts;
• understand what kinds of behaviour may be considered offences; and
• find out what solutions are available for dealing with your limited company’s debts.

This fact sheet includes:

• a sample budget for limited companies; and
• some useful contacts and links for you to get further help.

The sample letter mentioned in this fact sheet can be filled in on our website.

Some things about limited companies are complicated. You may need to speak to a solicitor or insolvency practitioner about certain issues. If you are unsure about whether you need to do this, contact us for advice. If you need further specialist help, Business Debtline can help you to find this. You can also visit the Companies House website for more information about how to deal with limited companies. Go to www.gov.uk and search for 'Companies House'

Identifying a limited company

A limited company's name must usually end in either ‘Limited’ or ‘Ltd’.

Under the law, a limited company is a separate entity from its directors and shareholders. In a small company, the directors are often the shareholders. A company may have one sole director and in some cases it will also have a secretary.

A limited company must be registered at Companies House, which is a government-sponsored agency that:

• maintains a register of limited companies;
• registers information that companies legally have to send to it; and
• makes that information available to the public.

A limited company must also have been granted a 'certificate of incorporation', have a ‘memorandum of association’ and ‘articles of association’. These are important documents that include details about how the business should be run.

Each year, a limited company must send Companies House:

• its ‘annual accounts’ (also called ‘statutory accounts’); and
• a ‘confirmation statement’ to confirm that the information Companies House holds about the company is correct.

For further guidance, go to www.gov.uk and search for 'Being a company director'.

Liability for limited company debts

In most situations, the director and shareholders are not liable for the limited company’s debts. However, there are some circumstances where they may be liable. These are listed below.

Personal guarantees

If a limited company applies for credit (often from a bank or supplier), the director may be asked to give a personal guarantee. In this situation, the director is known as the ‘guarantor’. The personal guarantee is a signed agreement stating that if the company becomes unable to pay the debt, the director can be held personally liable. Personal guarantees can be unsecured, or secured against property or land belonging to the guarantor. If the personal guarantee is secured, the property or land will be at risk of repossession if the guarantor is unable to pay.

Director offences

The company goes into formal insolvency proceedings and the director is found guilty of wrongful trading, fraudulent trading, misfeasance or other offences. See Offences later in this fact sheet for more information.

Pay as you earn income tax (PAYE)

HM Revenue and Customs (HMRC) use this system to collect income tax from someone’s wages at source if they work for an employer. As a director, if your limited company is dissolved (which means it is formally closed), you are not generally liable for your own PAYE. However, HMRC can ask you to make an arrangement to repay it. This is because a director is technically an employee of the limited company and HMRC can recover any income tax unpaid by an employer (the limited company) or from an employee (you).

Director's loan account

If a limited company enters into formal insolvency proceedings and the director’s loan account is in debit (which means the director owes the company money), then the director can be asked to repay the amount owed. For more information on director’s loans, go to www.gov.uk and search for ‘Director’s loans’.

What are 'formal insolvency proceedings'?

'Formal insolvency proceedings' is the term used to describe certain legal solutions that a limited company can take to deal with its debts or to bring the company to an end.

• A 'company voluntary arrangement' is a solution designed to deal with company debts.
• 'Administration', 'creditors' voluntary liquidation' and 'compulsory liquidation' are solutions designed to bring the company to an end.

We describe each of these solutions later in the fact sheet.

Offences

As a director of a limited company, it is your ‘fiduciary duty’ to act in the best interests of the company at all times. Fiduciary duty means your legal and moral duty to do the right thing for the company. If you do not do this, it may be viewed as an offence if your company later enters into a formal insolvency solution.

We outline some of the main offences you need to know about.

Wrongful trading

If you are the director of a limited company, it is your fiduciary duty to recognise when the company is insolvent. See the section Recognising when a company is insolvent.

If your company is insolvent or likely to become insolvent, you have a responsibility to act in the interests of creditors rather than in the interests of shareholders.

You should stop trading when there is no reasonable prospect of the company being able to get out of its current difficulties by continuing to trade. ‘Wrongful trading’ can include continuing to trade when the company is insolvent, resulting in the company’s debts increasing.

Temporary coronavirus measures

The Government introduced measures that temporarily suspended liability for wrongful trading. For many limited companies, this means that a director will not be responsible for any worsening of the financial position of the company or its creditors that occurred between the periods 1 March 2020 to 30 September 2020 and 26 November 2020 to 30 June 2021.

Fraudulent trading

Fraudulent trading means deliberately trying to defraud creditors or intentionally being part of a fraud taking place. For example, this would include taking money from the company and then deliberately entering incorrect information into company accounts.

Misfeasance

Misfeasance means taking company funds or property for your own gain at the disadvantage of the company’s creditors. An example of this offence is taking a salary from the company to pay your personal debts rather than paying the company’s debts.

Other offences

Other offences can include:

• deliberately entering incorrect information into limited company records;
• making false statements about the company; and
• missing out important information about the company when completing certain forms.

If you are the director or officer of a limited company and are found guilty of any of the offences described in the previous four sections, you may be held personally liable for the debts of the company. You could also be fined or disqualified from being a director for a certain length of time. In serious cases, you can be imprisoned.

If you are unsure whether a particular action is likely to be viewed as an offence, contact us for advice.

Recognising when a company is insolvent

It is important to understand if and when a company is insolvent as knowing this allows you to take steps to protect the company and to reduce the risk of you committing an offence.

A company is insolvent if either of the following situations apply to it.

• Cash-flow insolvent. The company cannot pay its debts as they fall due. Signs of this can include being behind with payments to creditors, receiving reminder letters and being threatened with legal action to recover debt.
• Balance-sheet insolvent. The value of the company's assets is less than the total debt that it owes.

A company can also be considered insolvent if it has received a 'statutory demand' and the time limit for replying to it has run out. A statutory demand is a legal document sent by a creditor demanding that the company pays what it owes them. It usually has to be sent to your company before the creditor applies to court to wind up your business. For more information, see Compulsory liquidation (winding up) in the section No net monthly profit available.

Dealing with limited company debts

Completing a business budget sheet

If your limited company is struggling to pay its debts, think carefully about whether it can trade through its financial difficulties. To help you do this, complete a business budget sheet showing the company’s income and outgoings. You may need help from your accountant to do this.

When completing the budget, use actual trading figures to build a realistic picture of how your company is performing. Work out the average income for the limited company compared to the outgoings (including salaries). This should usually be done over a period of 3 to 12 months. Your company will also need to budget for corporation tax, PAYE for employees and value added tax (VAT). See the Budget sheet for limited companies at the end of this fact sheet.

Check if your company has a net monthly profit, which means there is a monthly profit after all outgoings have been taken into account. If there is a net monthly profit, think about whether it is possible to make offers to all of the company’s creditors.

Later in this fact sheet, you can see the solutions available for your company, depending upon whether or not there is a net monthly profit.

Remember that continuing to trade when your company is making a loss could be viewed as wrongful trading. See the earlier section Offences.

Cash flow forecast

Cash flow is a measurement of how much money is coming in and out of your company over a specific period of time.

• Positive cash flow is when there is more money coming into the company than there is going out.
• Negative cash flow is when there is more money going out of the company than there is coming in. Even profitable businesses can have periods of negative cash flow.

A cash flow forecast involves predicting the flow of money into and out of your company for a future period. Regularly completing a cash flow forecast can help give you a clearer picture of the future state of your company. The information from a cash flow forecast can help you make important decisions, for example:

• preparing for periods of negative cash flow by setting money aside when there is a positive cash flow;
• reviewing and reducing expenses where possible;
• reviewing payment terms with suppliers and your own customers;
• applying for credit to help manage periods of negative cash flow; and
• deciding whether it is sustainable for your company to keep trading.

For more information on completing a cash flow forecast, go to https://www.british-business-bank.co.uk/finance-hub/ and search for 'How to create a cash flow forecast'. The British Business Bank is a government-owned bank that provides expert guidance and information for small businesses. An accountant may also be able to help you prepare a cash flow forecast.

Limited company moratorium

If you want a plan that lets your company continue trading, you may be able to apply for a moratorium. A moratorium provides your company with a formal breathing space to put a rescue plan into place.

• A moratorium initially lasts for a period of 20 business days.
• During the moratorium, your company will be offered protection against legal action by some creditors. For example, a commercial property lease cannot be ended because of rent arrears that had built up before the moratorium started.
• Creditors will not be able to wind up your company during a moratorium.
• You can apply to have the moratorium extended to 40 business days. The extension can be longer if creditors or the court agree to a longer extension

During the moratorium, the company would still need to continue to pay for:

• goods and services that it uses during the moratorium;
• ongoing rent;
• redundancy pay and wages (including arrears) owed under an employment contract; and
• any arrears and new sums that fall due on lending under financial services contracts, such as credit cards, loans and overdrafts.

If you want a moratorium, you will need an insolvency practitioner (IP) to confirm that your company is eligible to apply. An IP is usually an accountant or solicitor who is authorised to set up formal insolvency procedures. The IP will charge a fee. Shop around to find a reputable IP. Check the terms and conditions of their services, including their fees, before agreeing to anything and contact us for advice.

For more information about moratoriums, contact us for advice.

Net monthly profit available

Informal negotiations

Use your business budget to show how much money is available and how much the company can afford to offer in instalments to its creditors.

It is important that you identify which of the company’s creditors are considered priority and which are non-priority creditors.

If you are unsure of the type of debt your company has, contact us for advice.

Company voluntary arrangement (CVA)

A CVA is a legally binding agreement between your company and its creditors to pay an agreed amount off the debts over a short period of time. Payments can either be paid as a lump sum or in instalments (usually over three years).

A CVA has to be set up by an insolvency practitioner (IP). They are referred to as the ‘nominee’. An IP is usually an accountant or solicitor who is authorised to set up formal insolvency procedures. There will be high fees involved in setting up a CVA.

Shop around to find a reputable IP to act as your nominee. Check the terms and conditions of their services, including their fees, before agreeing to anything and contact us for advice. To find a directory of insolvency practitioners, go to www.gov.uk and search for ‘Find an insolvency practitioner’.

• With the help of the nominee, the directors put together a proposal to the company’s creditors.
• The nominee sends the CVA proposal to the company’s creditors, who are asked to vote on whether they agree to the proposal, or not. The creditors are given at least 14 days to consider the proposal.
• Each creditor is given a vote based on how much money they are owed. The company’s largest creditors have the largest part of the vote. For example, a creditor who is owed 10% of the company’s total debt holds 10% of the vote. In order for the CVA proposal to be accepted, at least 75% of the votes must agree to its terms. Therefore, if your company has a creditor that holds 75% or more of the company’s debt, they have the deciding vote.
• If the CVA is agreed, the nominee sends a further report to the Registrar of Companies at Companies House.
• When a CVA is agreed, the terms and conditions of the CVA are binding on ‘unsecured creditors’ even if they voted against the CVA.
• However, a CVA is not binding on certain other types of creditor. For more information, see the section Creditors not bound by the terms of a CVA.

Creditors not bound by the terms of a CVA

A CVA cannot affect the rights of some creditors without their consent. Your IP can ask creditors for their agreement.

Secured creditors and landlords could still take possession action for any outstanding arrears.

Debts to preferential creditors have to be paid in full unless they agree to receive less than they are owed through the CVA. Preferential creditors include:

• employees with unpaid wages, pension scheme contributions and holiday pay; and
• HMRC for PAYE income tax, VAT, employee National Insurance Contributions, student loan deductions and Construction Industry Scheme deductions debts.

No net monthly profit available

If there is no money available you may need to consider reducing your director’s salary. Director’s salaries should be taken based upon what the company can afford to pay and not on what is needed for the director to meet their own costs. If you are unable to meet your personal costs from the salary you are drawing, contact us for advice.

You will need to consider whether the company is insolvent, see the earlier section Recognising when a company is insolvent. Ask your accountant for help drawing up a balance sheet of the company’s assets and what it owes.

If your company is insolvent, consider the solutions described in the next sections.

Compulsory liquidation (winding up)

Compulsory liquidation is where a court order has been made for a company to be wound up. This can be ordered by the Court of Session or by the Sheriff court (if the company’s shares capital is less than £120,000).

A winding-up petition can be made by:

• the limited company itself, its directors or a shareholder;
• a receiver, administrator or supervisor;
• the Secretary of State for Business and Trade;
• the Financial Conduct Authority (FCA); or
• a creditor.

Petition to wind up your own company

You can present a winding-up petition to the court if your company has more than £750 of debt that it cannot pay. There are fees to apply to wind up your company. For more information on how to wind up your company, go to www.mygov.scot and search for ‘liquidate your limited company’.

A creditor's petition to wind up your company

The most common reason for a creditor to present a winding-up petition is that your company is unable to pay its debts. Your company is classed as being unable to pay its debts if:

• one of its creditors is owed more than £750, your limited company has received a statutory demand from them and the time limit stated on it has run out;
• it is proved to the court that either your company is unable to pay its debts as they fall due, or your company’s assets are valued at less than its total debt, or both; or
• one of its creditors gets a sheriff court decree against the company and sheriff officer action is unsuccessful.

Temporary measures during the coronavirus pandemic

Between 1 March 2020 and 31 March 2022, the government introduced several general measures to protect companies from creditors using a statutory demand to apply for a company to be wound up. If your company is dealing with a winding-up petition that was presented to the court during this period, contact us for advice.

What happens when a winding-up petition is issued?

A solicitor normally presents the winding-up petition to the court. The court may then appoint a ‘provisional liquidator’. If the company is still trading, an insolvency practitioner is normally nominated to act as provisional liquidator. They will protect the company assets and check whether the company is able to pay its debts as they fall due.

The court can then either:

• grant the winding-up order:
• dismiss the winding-up petition; or
• adjourn the case (that is, give further time for certain actions to be completed).

If the order is granted, an ‘interim liquidator’ is appointed. The interim liquidator will then:

• look after the assets of the company until a ‘liquidator’ is appointed; and
• ask for a statement of affairs and further information about the company’s history.

The statement of affairs should give information about the company’s financial situation, such as details of its shareholders, assets, debts and liabilities. If asked, the liquidator should provide a document to help you prepare this information.

A liquidator is then appointed. The liquidator will investigate the behaviour of the directors and members of the company and send a report to the Department for Business, Energy & Industrial Strategy. The company’s assets will be sold. The money raised will be used to cover any fees owed to the liquidator and the amount owed to creditors. The liquidator will then ‘dissolve’ (that is, formally close) the company after a final creditors’ meeting is held.

If the company does not have enough assets to cover the costs, the liquidator can apply to the court for the company to be dissolved early (normally three months after the winding up petition is applied for).

Can the winding-up order be prevented?

The company usually has eight days after the service of the petition to ‘lodge answers’ (that is, to write to the court and explain what its defence is). You would need a solicitor to represent you in court for this.

If the order has already been made because you were not aware of the petition, or unable to act in the given time, you may be able to ask the court to make an order staying, or sisting (that is, stopping) winding-up proceedings. You would need legal help and advice to do this. Business Debtline can help you to find legal advice that is right for you. Contact us for advice.

Company voluntary liquidation (CVL)

A company can go into a CVL, often referred to as a creditors' voluntary liquidation, when it is insolvent on the basis of cash flow or its balance sheet. See the earlier section Recognising when a company is insolvent.

The directors must hold a board meeting and make a formal decision that this is the case. The ‘resolution’ (decision) must then be advertised in the Edinburgh Gazette within 14 days and sent to the Registrar of Companies and the Accountant in Bankruptcy within 15 days.

Within seven days of the resolution being passed, directors must send a 'statement of affairs’ to the company’s creditors. The statement of affairs includes information about the company’s financial situation, including details of its creditors.

Directors must also issue a notice to the company’s creditors asking for their decision on who is to be made the liquidator.

A liquidator is then appointed to wind up the company. Directors must send the statement of affairs to the liquidator as soon they reasonably can.

The liquidator will be an insolvency practitioner (IP). They can be appointed by either the creditors or members of the company. The company’s assets will be sold and the money raised will be used to pay its debts and the liquidator’s costs. If any money is left, it will be shared between members of the company.

The liquidator will investigate the behaviour of the directors of the company. They will then write a report which will be sent to the Secretary of State for Business and Trade.

The process will end with the company being dissolved, which means it has been formally closed.

Receivers

A receiver can be appointed by anyone who holds a valid ‘floating charge’ against the assets of the company. A floating charge is a security given to a creditor over any assets that your limited company may hold at any point in time. Usually, the receiver can only be appointed if the floating charge was taken before 15 September 2003. A receiver has the power to sell the assets that are secured against the floating charge.

The receiver only needs to recover the debt owed to the floating charge holder. If there is any money left over, the company would also have to be liquidated for unsecured creditors to be paid.

The receiver will investigate the conduct of the company directors. A report will then be sent to the Secretary of State for Business and Trade.

The appointment of receivers is rare. If a receiver has been appointed to your company, contact us for advice.

Administration

This is where an administrator is appointed to take over the running of the company. They must be an insolvency practitioner and can be appointed by the court or by the company’s directors. The administrator will manage its affairs, business and property for the benefit of the creditors.

he aim of administration is to achieve either of the following outcomes.

• The rescue of your company as a going concern. ‘Going concern’ is a conclusion reached by the administrator that your company can trade with the assumption that it is unlikely to have to be wound up in the near future (usually the next 12 months).
• Get the best possible price for either your company or its assets, so that creditors get a better return than if the company were wound up.
• Value and sell any property owned by your company so that ‘preferential creditors’ can be paid. A preferential creditor is one that should be paid before others out of the money raised by the sale of the limited company’s assets and property. Preferential creditors include employees who are owed wages. The administrator will also investigate the conduct of your company’s directors. See the earlier section Offences.

Pre-pack administration

A ‘pre-pack administration’ is an arrangement for the sale of your company’s assets, normally to the directors or shareholders, which is agreed before your company enters administration. The assets are sold shortly after your company enters administration and this will normally be followed by the liquidation of your company.

You would need to appoint an insolvency practitioner (IP) to act as the administrator and there will be a charge for their services. You should shop around to find a reputable IP. Check the terms and conditions of their services, including their fees, before agreeing to anything.

Pre-pack administrations are complicated. Contact us for advice.

Strike off

Strike off is not a formal insolvency procedure. It is the method used to dissolve (that is, formally close) your company if it has no, or very few, assets and cannot afford to appoint a liquidator or administrator.

Am I eligible for strike off?

Your company will be eligible for strike off if, in the previous three months, it has not:

• traded or advertised its intention to continue trading (for example, by placing adverts in the local newspaper or online);
• changed its name; and
• got rid of any assets in the normal course of its business.

Your company cannot apply for strike off if it is going through:

• any formal insolvency proceedings, including a creditor's winding up petition that has not been withdrawn or dealt with by the court; or
• an application to the court for a scheme of arrangement.

If you are unsure whether your company can apply for strike off, contact us for advice.

Preparing for strike off

You will not currently be in a position to apply for strike off if your limited company is still trading or has traded in the previous three months. To prepare for strike off, your limited company should stop trading if it has not already done so, and you should let its creditors and members know about the intention to apply for strike off. Also tell creditors and members that your limited company does not have enough money to enter into formal insolvency proceedings. You can do this using our Considering strike off sample letter. The letter also invites creditors to wind up the company at their own expense.

Once the company has ceased trading for three months, you can apply to Companies House to strike off. You can do this in writing or online.

To apply for strike off in writing

You can apply for strike off in writing on form DS01. This is available from the Companies House website. Go to www.gov.uk and search for 'Strike off a company from the register (DS01)'.

The form should be signed and dated by:

• the sole director if there is only one;
• both directors if there are two; and
• by all, or the majority, of the directors if there are more than two.

The form should be sent with the fee of £10 to The Registrar of Companies for Scotland, Companies House, Crown Way, Cardiff CF14 3UZ.

All cheques or postal order should be made payable to ‘Companies House’, with your company number written on the back. Cheques should not be payable from the account of the company applying for strike off.

You must also send a copy of the application to relevant parties within seven days of applying for strike off. See the later section Who to tell about the strike off application.

To apply for strike off online

You can apply to strike off online on the Companies House website. Go to www.gov.uk and search for 'Strike off a company from the register (DS01)'. There is a fee of £8 and you will need:

• the company number;
• the company authentication code;
• an email address for each director; and
• a credit or debit card, PayPal account or Companies House account.

If the company does not already have an authentication code, you can phone or email Companies House to ask for one. The code will be sent in the post to the company’s registered address.

Companies House will send you a confirmation email when your application has been accepted. A copy of the strike off application should be available on the Companies House register within 48 hours of the confirmation email being sent. To access this document, you will need to do the following.

• Go to www.gov.uk and search for ‘Get information about a company’.
• Search the register for your company. The quickest way to find a company is usually to search by the company number or company name.
• When you have accessed information about your company, click on the ‘Filing history’ tab.
• Click on ‘View PDF’ next to your ‘Application to strike the company off the register’.

The document will show the company name, the company number and the date that the strike off was applied for (this will show as the ‘signature date’). You must also send a copy of this document to relevant parties within seven days of applying for strike off. See the following section Who to tell about the strike off application.

Who to tell about the strike off application

Within seven days of the day on which you apply for strike off, you must send a copy of the application to the following relevant parties.

• Any other company members (for example, shareholders).
• All existing and likely creditors (for example, banks, suppliers, former employees that are owed money and HMRC).
• Guarantors.
• Managers or trustees of any employee pension fund.
• Any directors who have not signed the form.

If any person becomes a relevant party between the date you apply for strike off and the date the company is dissolved, you must send them a copy of the strike off application within seven days of them becoming a relevant party.

Strike off offences

It is an offence for you to:

• apply for strike off if your company is not eligible;
• give false or misleading information on the application;
• fail to send copies of the application to all relevant parties within seven days; or
• fail to withdraw the strike off application if the company is no longer eligible.
• These offences can lead to an unlimited fine, imprisonment or both. You can also be disqualified from being a director for up to 15 years.

What happens next?

Once the form or online application is accepted, the registrar will place a notice on the company’s record stating that a strike off proposal has been made. The proposal is then advertised in the Edinburgh Gazette and an invitation is given for objections to the strike off. If no objections are received within two months of the date of the notice, the company will be dissolved (that is, formally closed). This will then be shown on the Companies House register.

If objections are made, the strike off will be put on hold. This is usually for six months. During this period the limited company will not be dissolved. This gives the objector(s) time to take action against the company (for example, by taking sheriff court action or using formal insolvency proceedings at their own cost). If your company has received an objection to its strike off proposal, contact us for advice.

Investigations into the conduct of company directors

If the company is dissolved, the Insolvency Service may still investigate the conduct of its former directors and make a report to the Secretary of State. If a former director is deemed to be unfit for the role of a director, they could be disqualified from being a director for a period of between 2 and 15 years.

If a former director is disqualified because of misconduct that caused a loss to creditors of the company, the Secretary of State may seek compensation from that person.

For more information on investigations into dissolved companies and examples of misconduct, see GOV.UK.

If your company owes a Bounce Back Loan

Bounce Back Loans are government-backed loans that were available to businesses affected by the coronavirus pandemic. If your company has an outstanding Bounce Back Loan and applies for strike off, an automatic objection will be raised. It is important to contact the lender of the Bounce Back Loan to explain your company’s circumstances if your company applies for strike off. The lender may request that the objection is withdrawn if they are satisfied that your company has no assets or income that it could use to pay the loan.

If your company has assets

If your company is dissolved, any assets that it owned will be passed to the Crown. This includes any credit balance in the company's bank account and any interest in a commercial property lease. If your limited company has assets and you are considering strike off, contact us for advice.

Compulsory strike off

Compulsory strike off is when Companies House takes action to dissolve and remove a company from the register. Companies House will only consider compulsory strike off if it believes that your company is not trading. Common reasons why Companies House might believe a company is not trading include:

• the confirmation statement not being submitted on time;
• accounts not being submitted on time;
• the company having no directors left; and
• letters to the company’s registered office address being returned or left unanswered.

Before starting the compulsory strike off process, Companies House will send a letter to the company’s registered office address to ask if the company is trading. If this is not answered within 14 days of being sent, a second letter will be sent to ask if the company is trading. If your company does not respond within 14 days of the date on the second letter, Companies House may place a notice on the company’s record and in the Edinburgh Gazette to state that a strike off proposal has been made. See What happens next? in the earlier section Strike off for information on:

• objections to strike off;
• when the company gets dissolved; and
• possible investigations into the conduct of the company’s directors.

If Companies House has started the compulsory strike off process and you want your company to be dissolved, contact us for advice.

Stopping compulsory strike off

If your company is in a proposal for compulsory strike off but you want to keep the company trading, you should contact Companies House as soon as possible. Let them know the company is trading and ask what you need to do to stop it being dissolved. Depending on why Companies House started the strike off process, you may be asked to submit further information and you may have to pay a penalty. See Useful contacts towards the end of this fact sheet.

Useful contacts

Companies House Phone: 0303 123 4500 www.gov.uk

Budget sheet for limited companies

You need to use an average figure over an appropriate period (for example 3, 6 or 12 months). To find your average 'monthly income' to input into the budget, use the example below.

• Receipts for the last three months = £3,000
• Divide £3,000 by 3 = £1,000
• Average monthly amount is £1,000

INCOME
Monthly income	£

COSTS
FIXED COSTS	---------------
Rent	£
Business rates	£
Business loan	£
Insurance	£
UTILITIES	---------------
Gas	£
Electricity	£
Water rates	£
Telephone	£
VARIABLE COSTS	---------------
Stock purchases	£
Bank charges	£
Wages (including PAYE and National Insurance)	£
Transport and motor costs	£
Stationery	£
Postage	£
Cleaning and repairs	£
VAT	£
Accountant	£
Professional fees	£
Other	£
TOTAL COSTS	£
Monthly income minus total costs (A)	£
Estimated monthly corporation tax (E) - See the notes below to work out this amount.	£
Net monthly profit = (A) - (E)	£

To work out the amount to put aside for the Estimated monthly corporation tax figure

• To get the monthly profits figure take away the Total costs figure from the Monthly income figure. Call the figure you get A.
• Multiply A by 12 to get the annual profits figure. Call this figure B.
• Then complete one of the following calculations.

If B (the annual profits figure) is £50,000 or less do this calculation

• Multiply B by 19% (the Small profits rate of Corporation Tax). Call the figure you get C.
• Divide C by 12 to get the estimated monthly corporation tax amount. Call this figure D.
• Put figure D in the Estimated monthly corporation tax box E in the budget sheet.

If B (the annual profits figure) is between £50,000 and £250,000 do this calculation

• You will need to work out how much Marginal Relief for Corporation Tax your company is entitled to. If Marginal Relief for Corporation Tax applies, it will reduce the rate of Corporation Tax that you need to pay to below that of the Main rate (currently 25%).
• To work out how much Marginal Relief your company is entitled to, use the GOV.UK Calculate Marginal Relief for Corporation Tax tool. The tool will take into account the marginal relief amount to work out your estimated Corporation Tax liability for the year.
• Divide the GOV.UK yearly Corporation tax liability figure by 12 to get the estimated monthly corporation tax amount.
• Put the figure you get in the Estimated monthly corporation tax box E in the budget sheet.

If B (the annual profits figure) is more than £250,000 do this calculation

• Multiply A by 25% (the Main Rate of Corporation Tax). This will give you the estimated monthly corporation tax amount.
• Put the figure you get in the Estimated monthly corporation tax box E in the budget sheet.

Other fact sheets that may help you

Commercial property leases fact sheet

Tax allowances and amounts fact sheet