UK Closing of company in UK, extracting profits

Jan 18, 2013
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Hi folks,
I have a company found 18 months ago in the UK (Ltd.). It had a very small activity (IT product sold on the internet), and now, since I have no more time to maintain it I need to close it. I and my partner are the only 2 participating persons, both of us are directors. The company has not maintained any special accounting records, and now we want to close it. I have never closed a company before, but do have some accounting knowledge, so I would like to ask for advice on the following.
1. How to extract money form the Ltd? For these 18 months we have achieved a profit of just 1,000 GBP and would like to distribute them evenly between ourselves:
• Option 1: Salary. If we both take the full amount as salary, profit will be reduced to 0 and no corporation tax will be paid. During these 18 moths we have not taken any salary, is it OK to do it now just before closure?
• Option 2: Dividend. But if we decide for dividends, we will have to pay first the 20% corporation tax on these 1,000 GBP. I understand that there is no difference in terms of personal tax burden if we extract the money as salary or dividends.
So, the question is, is it OK not to pay any tax at all, by reducing the profit to 0 with salary only?
2. Financial statements: Can you please advise me on how the Profit and Loss account and Balance sheet should look like, if we take everything out as salaries now? Profit will be reduced to zero, e.g. no tax burden. How about the Balance sheet, we have no assets, and our bank account wiil be made empty, will everything in the Balance sheet be zeroed out as well?
3. Accounting periods: For how many accounting periods do I need to prepare financial statements now? As the company existed for just 18 months, can I prepare I set of accounts, covering the whole period?
Thanks in advance


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