Author: Meg Dimmick (ACCA)
Whether it is due to ceasing trading, the voluntary or compulsory closing of your limited company, there may still be requirements to submit company tax returns and pay corporation tax on any profits made during winding up.
The corporation tax liability for a company winding up starts on the earlier of:
- Shareholders passing a resolution for winding up; or
- A winding up order imposed by the court; or
- A liquidator being appointed
The corporation tax liability for a company winding up is calculated on taxable profits arising from:
- Trading income and other income up until the final date of winding up; and
- The sale of other goods and/or assets during the winding up process
Corporation tax will be calculated at the same rates used for your company as before the winding up period. Corporation tax on assets sold for market value during winding up will be calculated on the chargeable gain made.
As a shareholder of a limited company, on winding up your company you may also be liable for taxes on the final payments made to you through the winding up process. These final payments are considered capital gains by HMRC in the individuals’ personal capacity. The nature of the gain will depend on how the winding up is completed – we recommend taking advice in this regard before winding up (if this is possible).
Specialised tax planning during the winding up process can ensure that both the company and shareholder receive the best and most efficient outcome. Feel free to contact us for support.
https://www.gov.uk/guidance/corporation-tax-selling-or-closing-your-company