A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
Strike off vs liquidation - what's the difference?
Strike off is an administrative shortcut for closing a clean, largely empty company; liquidation is the formal process for closing a company with meaningful assets or debts - and choosing the wrong one is one of the most common, and most reversible, mistakes directors make.
In this guide you'll learn how the two routes compare on cost, tax, debts, and director risk, and the simple tests that show which one your company needs.
The choice looks like a cost decision but is really a risk decision, so it's a good idea to understand what strike off doesn't do before being tempted by its price.
What is strike off?
Strike off (dissolution) is an application to Companies House - form DS01 and a small fee - to remove the company from the register.
The company must have ceased trading for three months, must not have changed its name recently, and must not be subject to insolvency proceedings; directors must notify all interested parties, including creditors and HMRC.
If nobody objects within the notice period, the company is dissolved - total elapsed time around two to three months, total cost negligible.
What is liquidation?
Liquidation is the formal closure process run by a licensed insolvency practitioner: an MVL for solvent companies distributing funds to shareholders, or a CVL for insolvent companies with debts they can't pay.
It costs more than strike off and exists precisely to handle what strike off can't: assets to distribute, creditors to treat fairly, employees to process, and a director conduct review that draws a clean line under the company's affairs.
Why shouldn't I strike off a company with debts?
Because it rarely works, and the failure modes land on the director.
Creditors are notified of the application and can object - HMRC objects routinely where tax is owed - which blocks the dissolution and flags the company for attention.
Even if a dissolution slips through, creditors can apply to restore the company to the register for years afterwards and pursue it (and scrutinise its directors) as if nothing had happened.
And since 2021, the Insolvency Service has explicit powers to investigate and disqualify directors of dissolved companies - introduced specifically because of directors dissolving companies to dodge debts, particularly Bounce Back Loans.
The comparison that matters: a CVL costs a few thousand pounds and ends the matter; a failed strike off costs less up front and can reopen indefinitely.
How does tax treatment differ for solvent companies?
For a solvent company, the strike off vs MVL choice is mostly a tax calculation.
On strike off, distributions to shareholders above £25,000 are taxed as income; below that threshold, capital treatment applies.
In an MVL, the entire distribution is capital, and qualifying shareholders may pay a reduced CGT rate under Business Asset Disposal Relief - which is why, above roughly £25,000 of retained funds, the MVL's fee is usually repaid many times over in tax saved.
Our full comparison of closure routes includes worked reasoning on where the threshold falls.
Quick tests: which route does my company need?
Company dormant, no debts, under £25,000 left - strike off.
Company solvent with more than £25,000 retained - MVL.
Company owes money it can't pay - CVL, not strike off; see your options when insolvent.
Company owes money and someone suggests strike off anyway - treat that as the signal to take licensed advice, because the person suggesting it won't be the one facing the restored company.
Where can I get advice on the right closure route?
Call our licensed insolvency practitioners in Manchester on 0333 023 5090. A short, confidential conversation with an ICAEW-licensed IP will confirm which route fits - and if the answer is strike off, we'll tell you that too.
InsolvencySupport.co.uk is operated by Xeinadin Corporate Recovery Limited (company no. 11415156), 100 Barbirolli Square, Manchester M2 3BD. Our insolvency practitioners are licensed and regulated by the ICAEW.
This article is intended for general information purposes only and does not constitute financial, legal, tax, or professional advice. Always take advice from a licensed insolvency practitioner about your specific position.
Reviewed by Alan Fallows, Licensed Insolvency Practitioner, ICAEW.