A guide to the tax implications when selling or closing your business

If your company ceases trading, 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, as well as considering other tax implications which may apply.

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

It is firstly important to note the the date when the winding-up process for your company started, as this affects your Corporation Tax payment and Company Tax Return filing deadlines and requirements. The winding-up starts at the earliest point when one of the following happens:

  • 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
  • a liquidator is appointed

At that start point, 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 is 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.

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. Your company’s Corporation Tax Office communicates with the Official Receiver or liquidator, accessing any information on file about your business.

If your business ceases trading and you sell its assets separately for their market value (for example plant, machinery, vehicles, computers, customer list) it will be liable to pay Corporation Tax on any chargeable gains and other profits on the disposal of these assets. If as an individual you sell your shares or the assets of your company, and then let it be struck off the Companies Register and keep the cash proceeds of the sale, you may be liable for Capital Gains Tax, or sometimes Income Tax.

So 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 actually be able to claim tax back.

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