Selling or closing your company and Corporation Tax

If your company or organisation ceases trading or business activity, closes down or is forced to close down, you may still have to file Company Tax Returns and pay Corporation Tax during the closing or winding-up process.

If you sell the shares in your company as a going concern, or sell the assets of your company, there may be Corporation Tax implications for the company. In addition, you as an individual shareholder may have to pay Capital Gains Tax on any chargeable gains.

This guide tells you about the Corporation Tax implications in these various situations.

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Closing your company and Corporation Tax

There are several reasons why you may want, or be forced, to close down or wind up your company or organisation such as:

  • you may be retiring or moving into full-time employment so you want to close down your company's operations
  • someone your company owes money to for some time (a 'creditor') gets a court order to force you to close down your company; this process is known as 'winding up' a company or 'insolvency'
  • the members of your club, society or association may want to close down the organisation
  • you may wish to transfer the company’s business to shareholders who continue the business in a different legal form (for example, on a self-employed or partnership basis)

This guide only covers the impact of closing down your company or organisation on your Corporation Tax affairs. You should contact Companies House, the Insolvency Service, your financial adviser or specialist for other information and advice.

Find out about winding up a company on the Companies House website (Opens new window)

Read about company insolvency and liquidation on the Insolvency Service website (Opens new window)

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Winding up your company and Corporation Tax

You need to know when the winding-up process for your company has started - this can affect your Corporation Tax payment and Company Tax Return filing deadlines and requirements.

The winding up of your company for Corporation Tax purposes normally starts on the earliest of when:

  • your company goes into administration
  • your company's shareholders pass a winding-up resolution to shut it down
  • a winding-up order is imposed on your company by the court; for example, following an application by an unpaid creditor, such as HMRC if you don't pay your company's Corporation Tax (see separate section below)
  • a liquidator is appointed

Winding up and Corporation Tax accounting periods

At the start of your company being wound up, your current Corporation Tax accounting period comes to an end and a new accounting period begins. From that point on, your company's accounting periods run for periods of 12 months until the winding up is complete.

If your company is in the process of being wound up, it's still subject to Corporation Tax paying and filing requirements. For example, your company must continue to file a Company Tax Return and pay Corporation Tax on taxable profits arising from:

  • trading income and other income such as investment income
  • the sale of other goods or assets (chargeable gains) for example to pay off creditors

Your company will pay any Corporation Tax due during the winding-up period at the same rates as before the winding-up period started.

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Winding up and control of the company

In certain winding-up situations a liquidator, or the Official Receiver, becomes the beneficial owner of your company. From this point on, company shareholders or directors have no further say in the running of the company including filing Company Tax Returns and paying Corporation Tax.

When this happens, your company's Corporation Tax Office communicates with the Official Receiver or liquidator and can disclose information that would have been known by your company. For example, correspondence, Corporation Tax payment history, notes of interviews with company directors or other company officers.

In other winding-up situations such as administrative receivership or creditors' voluntary arrangement, the company officers retain responsibility for filing Company Tax Returns and paying Corporation Tax.

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HMRC can wind up your company if you don't pay Corporation Tax

In extreme cases, where you continue not to pay your company's Corporation Tax, HMRC will apply to the Court for a winding-up order to have your company closed down.

Find out how HMRC can close your company if you don't pay your Corporation Tax

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Selling your company as a going concern and Corporation Tax

There may be Corporation Tax consequences for your company if it's sold as a going concern. You are selling the shares in your business for the market value of the business as a whole.

Impact on company shareholders

You as an individual shareholder will be liable for Capital Gains Tax on the sale or disposal of your shares in your company. You will pay Capital Gains Tax on any increase in value of the shares over and above the value when you got them net of, for example, any relevant Business Asset Taper Relief or other available reliefs.

Capital Gains Tax on shares: the basics

Disincorporation Relief

If your company transfers its business as a going concern to shareholders who continue the business in a different legal form (for example, on a self-employed or partnership basis), the company and shareholders may be able to claim Disincorporation Relief.

Disincorporation Relief is a form of roll-over or deferral relief which allows a company to dispose of its business with all the assets of the business apart from cash, without the company incurring a Corporation Tax charge on the disposal of qualifying assets.

Read about disposing of a company’s business and claiming Disincorporation Relief

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Closing your company or organisation, selling the assets and Corporation Tax

If your company ceases trading and you sell its assets separately for their market value (for example plant, machinery, vehicles, computers, customer list) your company will be liable to pay Corporation Tax on any chargeable gains and other profits on the disposal of these assets.

Impact on company shareholders

If you're a company shareholder and you wind up your company, or you sell the assets of your company, and then let it be struck off the Companies Register and keep the cash proceeds of the asset sale, you as an individual may be liable for Capital Gains Tax, or sometimes Income Tax. This is because you as an individual have in effect sold or disposed of your shares in the company.

You would normally pay Capital Gains Tax on the increase of what would have been the value of the shares over and above their value when you got them net of, for example, any relevant Business Asset Taper Relief, other available reliefs or winding-up costs. You will pay Income Tax if the company is struck off rather than wound up unless all of the following conditions apply:

  • the company's debts are settled
  • any debts due to the company are collected
  • the amount you take is £25,000 or less

Capital Gains Tax on business assets: the basics

Closing your unincorporated organisation and Corporation Tax

If you close down your club, society or other unincorporated organisation and sell off its assets (such as furniture or equipment) your organisation will be liable for Corporation Tax on any chargeable gains (capital gains for Corporation Tax purposes) or other profits on the disposal of those assets. For example, if you sell some equipment for more than you paid for it.

Unincorporated organisations and Corporation Tax

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Managing your other tax responsibilities when closing or selling your business

If you're closing or selling your company or organisation, it's important to make sure you let all the relevant parts of HMRC know. This will ensure you won't underpay or overpay any tax and will prevent HMRC from sending you demands or bills that you aren't liable for.

In many circumstances, you'll be able to claim tax relief against losses you've made and in some specific circumstances, you may be able to claim tax back. And if you have difficulty in paying what you owe, you may be able to make an arrangement with HMRC to pay over a longer period of time.

Read more about what you may need to do in our guide below.

Closing or selling a business

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More useful links

Corporation Tax glossary

Read about loss relief when your company or organisation stops trading

Download a leaflet on how to wind up your own company from the Insolvency Service website (DOC 873K) (Opens new window)

Read more about the tax implications of when a company goes into administration

Closing or selling your business and VAT registration

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