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Close or Rescue my Self-Employed Business

Company debt advice for limited company contractors and self-employed professionals

How can you protect your business from rising costs and ever-changing legislation, such as IR35? Understand formal insolvency procedures to help save or close your PSC (personal service company), such as a Company Voluntary Arrangement (CVA), Company Administration or Creditors’ Voluntary Liquidation (CVL).

Rescue, Recovery, and Closure Options for Self-Employed Companies

5 million self-employed individuals are contributing over £300 billion to the economy and representing 15.3% of employment in the UK. As businesses set out to minimise overheads and cancel the use of PSCs (limited companies) and contractors due to the IR35 reform, sourcing contracts is proving to be a challenging task.

If you are considering closing your limited company or contracting business due to the economic and regulatory uncertainty, understanding the range of options open to you and your business is vital.

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Close your Self-Employed, PSC, or Contractor Company

If your company is insolvent, no longer has the necessary funds to repay creditors, and you are considering whether operating through a Personal Service Company (or PSC) is still the right option for you, you may wish to consider whether placing the company into liquidation is the best route forward. This can be done through a director-initiated process known as a Creditors' Voluntary Liquidation.

A Creditors’ Voluntary Liquidation (CVL) is a formal insolvency procedure which consists of generating funds to repay creditors through the sale of assets, settling creditor affairs and bringing the business to an end. A CVL is administered by a licensed insolvency practitioner who will be appointed to the role of liquidator to handle the whole process from start to finish.

A CVL consists of a formal instruction to appoint a licensed insolvency practitioner following your decision to close the business. Creditors will then be notified and presented with the Statement of Affairs which clarifies the financial position of the business. The liquidation will then commence as your appointed licensed insolvency practitioner acting as the liquidator will direct the sale of company assets to generate funds for creditors. Your company will then be struck off the Companies House register. A licensed insolvency practitioner can help ascertain the best liquidation route for your business and assess the likelihood of successfully rescuing your company.

IR35 Company liquidation – If you are interested in liquidating your limited company due to the IR35 private sector reform, the route you take will depend on whether your business is solvent or insolvent. If your business is insolvent, a Creditors’ Voluntary Liquidation as mentioned above may be the ideal route for you. If your business is solvent and consists of retained profits over £25,000, a Members’ Voluntary Liquidation (MVL) can facilitate a cost-efficient exit.  An MVL is a formal process for solvent companies with the ability to fulfil liabilities in full and settle outstanding affairs with creditors within 12 months. This route allows you to extract funds tax-efficiently and take advantage of Business Asset Disposal Relief, if eligible.

Our licensed practitioners are on hand to support you and can offer a free consultation to limited company directors. If you are struggling due to the coronavirus pandemic or wish to liquidate your business in light of the IR35 reform, a member of the Real Business Rescue team can help advise on a suitable solution.

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Rescue my Self-Employed business

If your business can be rescued, a Company Voluntary Arrangement (CVA) can help negotiate a legally binding repayment plan with creditors, typically over a 3 to 5 year period. This formal insolvency procedure can help turnaround your insolvent or contingently insolvent business by lowering the monthly instalments. If your business is in the firing line of creditor pressure and legal action, a CVA can protect your business against this.

If your business has realistic prospects of survival and holds asset value, company administration is a formal insolvency procedure which can be administered by a licensed insolvency practitioner.  If your limited company is on the receiving end of creditor pressure and impending legal action, the moratorium provided by company administration can shield the company from further litigation while a plan for recovery can be put in place.

Company administration can often prevent a business from being forced into liquidation, preserving viable elements of the business and safeguarding employees. Your appointed insolvency practitioner will assume the role of company administrator and will be responsible for overseeing the affairs of the business and directing the sale of assets to generate funds to repay creditors as far as possible.

Alternatively, if your self-employed limited company requires a cash injection to allow for growth, expansion and reach greater heights, commercial finance can help remove the restriction to cash flow. There are numerous forms of finance options which can help protect the financial position of your business and expand the service offering.

Invoice finance can help unlock funds tied up in invoices which are yet to be paid for services fulfilled, removing the waiting time between contracts and tightening the cash flow gap. If you need to invest in machinery, equipment or tools to enhance your service, asset finance can help fund the purchase, tailored to your preferred repayment style. For example, hire purchase allows you to split the cost of a high-value product into affordable instalments over a long-term period, resulting in a final payment which will transfer asset ownership to your business.

At Real Business Rescue, we have a close working relationship with over 50 trusted finance lenders offering finance options at competitive rates. Get in contact with our finance team to obtain a quote and for advice on the best form of growth capital for your business.

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