Guidance

Corporation Tax: online filing at the end of a company’s life

Updated 12 June 2017

Overview

If your company or organisation is at the end of its life and in any form of formal winding up procedure, you may have difficulty producing full Company Tax Returns and have problems with mandatory online filing. For this reason, insolvent companies in any form of formal winding up or administration procedure don’t have to file online. This exemption doesn’t apply to companies moving towards informal striking off or during a solvent Members’ Voluntary Liquidation (MVL).

Who must file a return online

You must send a Company Tax Return (CT600), if you get a ‘notice to deliver a Company Tax Return’ (CT603) from HM Revenue and Customs (HMRC), under Schedule 18, Finance Act 1998, Paragraph 3.

This notice is sent to every company believed to be active, and defines the required content of a Company Tax Return. In particular, the notice requires the return to include a copy of the company accounts for the period covered by the return and computations showing how the specified information (entries on the Company Tax Return form (CT600)) have been calculated from the relevant figures in the accounts.

The meaning of accounts is defined in the notice. For a company normally resident in the UK, it means the company’s individual accounts which it’s required to prepare under Section 394 of the Companies Act 2006.

Nearly all Company Tax Returns for periods ending after 31 March 2010 have to be sent to HMRC online.

Exemptions from online filing

There’s a legal exemption for insolvent companies who don’t have to file their Company Tax Returns online if they’re:

• subject to a winding up order
• in formal administration
• in administrative receivership

This legal exemption extends to:

• creditors’ voluntary liquidations
• company voluntary arrangements
• provisional arrangements under a court order

Once any of the above legal processes begin, an insolvent company can choose whether to file its return online or on paper.

This exemption applies to any return, for any period, while a company is subject to formal insolvent winding up. It applies to any outstanding Company Tax Returns for periods:

• before the start of the winding up
• before appointment of the Insolvency Practitioner (IP)
• within the period of the winding up procedure

This legal exemption of insolvent companies from mandatory online filing means that HMRC can and will continue accepting an informal return from liquidators, for any period, as set out in the Company Taxation Manual.

Example

Company A Ltd is insolvent and hasn’t prepared formal Companies Act individual accounts or delivered outstanding Company Tax Returns for periods before the start of or within the period of the winding up.

For any of those periods HMRC will accept:

• formal returns online or on paper
• informal returns on paper

Informal dissolution and MVL for solvent companies

The exemption doesn’t apply to solvent dissolution where you seek informal striking off or enter a MVL. There may be tax risks to consider as a result of the cessation and striking off, so a full online Company Tax Return may be needed.

For any period where HMRC issues a ‘notice to deliver a Company Tax Return’ (CT603), normal filing requirements for a solvent company apply to the return, even in an MVL where an IP has been appointed. By law, we’ll require a full Company Tax Return online in accordance with the requirements of the notice for that period.

Returns for solvent companies

An accounting period of a solvent company ends when it stops trading or isn’t within the charge to Corporation Tax.

An accounting period for a MVL also ends immediately before the winding up starts. There’ll be a final accounting period, running from the day after the end of the last normal accounting period and ending with the last day of trading or the day before the start of the liquidation. This is known as the stub period.

We’re normally made aware of any cessation and intention to seek striking off when the ‘notice to deliver a Company Tax Return’ (CT603) for the last normal accounting period has been issued. You must meet the needs of the notice and file a full Company Tax Return for that period. Include Companies Act individual accounts and tax computations tagged in Inline eXtensible Business Reporting Language (iXBRL).

Example

Company B Ltd is solvent and the directors want to close down the business, the:

• company’s normal accounting date is 31 December
• ‘notice to deliver a Company Tax Return’ (CT603) for accounting period ending 31 December 2016 is issued in January 2017
• company ceases activity on 1 April 2017 and notifies HMRC that it intends to seek voluntary striking off
• issued notice CT603 requires the company to file a full Company Tax Return for the last normal accounting period to 31 December 2016, including iXBRL tagged Companies Act individual accounts and tax computations

We’ll need a full online Company Tax Return for any accounting period which the return will be due before the striking off date.

How HMRC deal with typical cases

Agreeing figures before the filing date to allow striking off or liquidation

You may ask HMRC to agree to striking off before the statutory filing date for the last normal accounting period return, when the Company Tax Return isn’t legally due. We’ll need to agree the position for the stub period following the last normal accounting period up to the proposed date of striking off or start of liquidation. A ‘notice to deliver a Company Tax Return’ (CT603) won’t have been issued requiring a return for that period.

Where we believe there are reasonable grounds that there’s a risk of tax loss, we’ll insist on a full online Company Tax Return and object to the striking off until we receive it.

Where we don’t think there is a tax loss risk, for the last outstanding accounting period and any stub period, we’ll seek to agree the tax liability of the company on the basis of management accounts or similar financial statements and tax calculations based on them. This financial information delivered for settling company tax affairs to allow striking off is not a Company Tax Return, so we can’t enquire into it.

If a company sends informal information successfully online which doesn’t meet the legal requirement to be a company tax return we’ll accept the position, but the information delivered won’t legally be a Company tax return. We’ll also accept this information on paper.

Example

Company C Ltd wants to wind up as quickly and cheaply as possible, the:

• company’s normal accounting date is 31 December
• company asked HMRC in May 2016 if it can be struck off on 30 September 2016
• company’s return for its last normal accounting period to 31 December 2015 isn’t due yet
• ‘notice to deliver a Company Tax Return’ (CT603) is issued January 2016, with a statutory filing date of 31 December 2016
• stub period will be from 1 January 2016 to 30 September 2016, when a CT603 notice hasn’t been issued

HMRC will review and decide if full Company Tax Returns aren’t needed. As there’s no risk of tax loss, we’ll agree to settle the tax liability for the last outstanding accounting period and the stub period using supplied tax calculations based on management accounts, sent by post. The relevant tax figures are processed as a basis for settling the tax position.

If the striking off is delayed and doesn’t take effect until after the filing date for the last normal accounting period, we’ll only object to the striking off and need a Company Tax Return if there are tax risks.

Where the return for the last normal accounting period is due before the striking off date

You must meet the needs of the ‘notice to deliver a Company Tax Return’ (CT603) and file a full online Company Tax Return for that period, including tagged iXBRL Companies Act individual accounts and tax computations. If you don’t, you’ll have to pay penalties for non-filing for informal striking off cases. However there are considerations for MVLs.

Once the liquidation starts, liquidators are under no statutory requirement to prepare full Companies Act accounts for these periods.

Under Section 394 of the Companies Act you must prepare company individual accounts. For tax purposes, under the taxes acts the IP becomes the proper officer of your company and the only person your company can act through.

If the statutory accounts haven’t been prepared before start of liquidation, the IP is unable to meet with the notice in full. They’ll not be able to deliver the accounts part of the return. The necessary computations can’t be produced either, as a set of accounts doesn’t exist so both iXBRL attachments normally required will be unavailable.

You must still file online. However, HMRC must accept the filing requirement has been met if trying to satisfy the online filing requirement will limit your ability to file the return before the filing date. Where it’s impossible for an IP to deliver normal accounts and computations, we can accept something which doesn’t meet the legal requirements of the notice.

The IP must file an online return, they’ll need to:

• complete the relevant boxes of the Company Tax Return (CT600)
• declare there are no accounts and computations attached
• attach one or more PDF documents as ‘Other information’ and send:
  • the relevant draft accounts or financial reports
  • a calculation of any Corporation Tax payable, showing the derivation of the self-assessment in the Company Tax Return (CT600) from the financial statements provided

This return will process through the online filing service and can be enquired into. We’ll accept this as satisfying the filing need, subject to risk assessment of the tax charge and enquiry if needed.

What HMRC need for earlier outstanding periods

The online filing obligation should be met whenever HMRC needs a full Company Tax Return. We’ll expect full online iXBRL tagged Company Tax Returns for normal accounting periods when the filing date has passed.

If at the time that the striking off is proposed or the MVL starts there are accounting periods where the:

• Company Tax Return is outstanding
• filing date has passed

We’ll only accept a full online Company Tax Return as settling the filing responsibility.

For MVL the IP may not be able to supply a full Company Tax Return depending on what accounts preparation has been completed and the situation may be beyond their control. We’ll still make the appropriate tax determinations for these periods and apply the relevant penalties for non-filing. These should be paid during liquidation by the liquidator as debts to be discharged.

The IP must make sure that we’ve the best available information to base determinations, and tax is paid on time to avoid any tax penalties. We’ll expect the IP to be able to provide detailed management accounts and a tax computation based on those accounts.

We’ll review this information and apply risk assessment, if we’re satisfied we’ll make the determination in line with the computations supplied by the IP. If not we’ll make a determination to the best of our information and belief.

This information isn’t a Company Tax Return, so it doesn’t need to be filed online.