What you need to do or know if your company is sold, stops trading or is being wound up for Corporation Tax purposes.
If your company or organisation ceases trading or business activity, 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.
Winding up your company and Corporation Tax
If your company is in the process of being wound up, it’s still subject to Corporation Tax paying and filing requirements.
The winding up of your company for Corporation Tax purposes normally starts on whichever is first:
- 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
Winding up and accounting periods
At the start of your company being wound up, 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.
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.
If you don’t pay Corporation Tax
In some cases, where you continue not to pay your company’s Corporation Tax, HM Revenue and Customs (HMRC) will apply to the court for a winding up order to have your company closed down.
Selling your company as a going concern and Corporation Tax
There may be Corporation Tax consequences for your company if it’s sold as a going concern. You are selling the shares in your business for the market value of the business as a whole.
Impact on company shareholders
As an individual shareholder you will be liable for Capital Gains Tax on the sale or disposal of your shares in your company. You’ll pay Capital Gains Tax on any increase in value of the shares over and above the value when you got them net of, for example, any relevant Business Asset Taper Relief or other reliefs.
If your company transfers its business as a going concern to shareholders who continue the business in a different legal form (for example, on a self-employed or partnership basis), the company and shareholders may be able to claim Disincorporation Relief.
Closing your company or organisation, selling the assets and Corporation Tax
If your company ceases trading and you sell its assets separately for their market value (for example plant, machinery, vehicles, computers, customer list) your company will be liable to pay Corporation Tax on any chargeable gains and other profits on the disposal of these assets.
Impact on company shareholders
You may be liable for Capital Gains Tax or Income Tax if either:
- you’re a company shareholder and you wind up your company
- you sell assets of your company,and then let it be struck off the Companies Register and keep the cash proceeds of the asset sale.
You would normally pay Capital Gains Tax on the increase of what would have been the value of the shares over and above their value when you got them net of, for example, any relevant Business Asset Taper Relief, other available reliefs or winding-up costs. You will pay Income Tax if the company is struck off rather than wound up unless all of the following conditions apply:
- the company’s debts are settled
- any debts due to the company are collected
- the amount you take is £25,000 or less
Closing your unincorporated organisation and Corporation Tax
If you close down your club, society or other unincorporated organisation and sell off its assets (such as furniture or equipment) your organisation will be liable for Corporation Tax on any chargeable gains (capital gains for Corporation Tax purposes) or other profits on the disposal of those assets. For example, if you sell some equipment for more than you paid for it.