Tax guidance updated for companies entering liquidation

HMRC has published updated guidance on mandatory online filing at the end of a company’s life, outlining the risks for companies that seek informal striking off or enter a Members’ Voluntary Liquidation (MVL) and therefore do not qualify for exemption

Problems arise when companies enter formal winding up which are highlighted in mandatory online filing, therefore insolvent companies in any form of formal winding up or administration procedure are exempt from filing online. However this exemption does not apply to companies moving towards informal striking off or those entering a MVL.

Risks can arise as a result of the termination and striking off which need to be considered, therefore a full company tax return is required.

Normal filing requirements for a solvent company apply to the return for any period for which HMRC issue a notice even in an MVL where an insolvency practitioner has been appointed.

An accounting period of the company ends when it ceases to trade or ceases to be within the charge to corporation tax. In the case of an MVL, an accounting period also ends immediately before the winding up starts, so there will nearly always 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 commencement of the liquidation. This is known as the stub period.

HMRC is alerted of termination when the notice for the last normal accounting period has been issued.

Where there is not a risk of tax loss HMRC will agree the tax liability of the company for the last outstanding accounting period, as well as the stub period, on the basis of management accounts or similar financial statements and tax calculations based on them.

Corporation Tax: mandatory online filing and the end of a company’s life is available here.

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