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.

Let’s start a conversation 

    Subscribe me for updates and news from In Accountancy

    Related articles

    tax on interest income
    Limited Companies

    Maximise Your Tax-Free Savings Interest Income: UK Guide for 2024

    Over the last year UK savers have finally been in a position to earn some interest on their savings, but how is interest income taxed, and how can you maximise the tax free element of what you receive? 🤔
    If you meet certain criteria or have flexibility in how you structure your income, then you can potentially enjoy up to £18,570 of your income completely tax-free!! 🥳

    Read More »
    time to pay arrangement
    Limited Companies

    Time to Pay Arrangements: A Lifeline for Owner-Managed Businesses

    Are You Struggling to Meet Your Tax Obligations?

    More than 30,000 UK businesses were involved in some kind of insolvency action in 2023, which was an increase of more than 50% compared with 2021 according to an article in the Guardian earlier this year.

    And the economic outlook would suggest that despite the fact that we are no longer in recession, 2024 and 2025 will be a challenging year for UK small business.

    With this in mind we have prepared the following guide and associated video to help you understand what your options are with regards to agreeing what is known as a ‘Time to Pay’ arrangement with HMRC.

    Read More »

    Find out how we can help?

    Lectus scelerisque a donec tincidunt litora per eleifend eget ut sagittis conubia pharetra scelerisque dui ultricies duis parturient auctor adipiscing.


    Let’s start a conversation 

      Subscribe me for updates and news from In Accountancy