COM130110 - Returns / notices: notices and returns: in receivership or administration
|
Receivership or Administration (prior to the Enterprise Act 2002) |
Receivers
Banks and other specific lenders normally appoint Receivers to recover loans secured by a charge over a company’s assets. A Receiver may be appointed in respect of a specific asset under a fixed charge. A Receiver appointed in respect of all, or substantially all, of a company’s assets under a floating charge is called an Administrative Receiver.
The Receiver‘s main obligation is to preferential creditors and to the lender who appointed him. He usually intends to dispose of the business as a going concern but if this fails, he will sell the assets to satisfy
- Preferential creditors
Then
- Other creditors
Receivers are under no obligation to pay any CT (a non-preferential debt) and most will not deliver returns.
Strictly, the Corporation Tax obligations remain those of the company, but in reality the company is usually unable to meet them while the Receiver is in place.
Liquidation often follows a Receivership.
Administrators
Before the Enterprise Act 2002 (Word 30KB), the Court appointed Administrators on petition from the company, directors or creditors. The Enterprise Act removed the requirement for court approval. As long as companies can convince an insolvency practitioner they are insolvent, they can declare themselves in administration at will. The declaration of administration must be filed at court but there is no consideration of this by the court, it is stamped and filed away.
The aim is to protect the company from its creditors, while giving it a chance to restructure and become solvent so that it can be handed back to the directors to continue in business. If it does not survive, the administrator may realise and distribute assets, before the company goes into liquidation
The Enterprise Act 2002 made administrators appointed on or after 15 September 2003, the 'proper officers' of the company in legal terms and wholly responsible for the tax affairs of the company during their period of appointment. Administrators appointed before this date, although in day-to-day control of the company and responsible for ensuring that it meets all its obligations, do not have any legal responsibility and consequently there may be delays in producing accounts and delivering returns. As a result, the approach taken differs according to when the administrator was appointed.
Receivership or Administration (prior to the Enterprise Act 2002)
Because of the practical difficulties in getting a company to comply with its Corporation Tax obligations whilst in receivership or administration (where the effective date for an administration is earlier than 15 September 2003), the following approach is recommended
- COTAX will issue notices to deliver (Word 29KB) unless the company is dormant (Word 28KB). If the company is dormant, use Function MAPD (Maintain AP Dates) to amend the AP record
- Do not insist upon the delivery of formal returns
- Accept management accounts or other information, in place of audited accounts. For more information on dealing with informal returns see section
- ‘CT Pay And File Assessments’ in the ‘Assessing’ business area for CT Pay and File APs
Or
- ‘Revenue Determinations’ in the ‘Assessing’ business area for CTSA APs
If an insolvency practitioner seeks a repayment, for example as the result of a loss relief claim, or seeks to surrender losses as group relief, it may be appropriate to seek more substantial evidence of the loss incurred. You may also need to liaise with Debt Management to check if there are any other Crown debts that you can set against any CT repayments due. For more information see the Company Taxation Manual (CTM) at CTM04505.
- Do not issue estimated assessments for CT Pay and File APs. Use Function PAST (Prepare Full Assessment) to set the No Assessment Required signal
- Do not issue Revenue Determinations (Word 29KB) for CTSA APs. Use Function RAMA (Record / Amend Assessment) to set the No Determination Required signal
- Do not pursue penalties for failure to deliver returns while a Receiver or Administrator is in place. Use Function MPEN (Maintain Penalty Signals) to set the No Penalty Required indicator. For more information about penalties see the ‘Penalties’ business area
Receiverships (from the date of the Enterprise Act 2002)
Under The Enterprise Act 2002, administrators appointed on or after 15 September 2003 are 'proper officers' in legal terms. Although the company's period of account can remain unchanged the appointment of an administrator triggers the end of an existing accounting period and the start of a new one on the date of appointment. Similarly the last day of their appointment marks the end of an accounting period and the start of a new AP on the following day. Unlike 'old' style administrators they are legally responsible for the tax affairs of the company including the delivery of returns, payment of tax and penalties incurred for their period of administration.
For a list of functions to use in particular situations, see COM130021.
For legislation applying to this subject, see COM130012.
