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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There are several reasons why you may want, or be forced, to close down or wind up your company or organisation such as:
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.
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:
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:
Your company will pay any Corporation Tax due during the winding-up period at the same rates as before the winding-up period started.
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.
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.
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.
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.
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.
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.
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:
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.
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.