Closing Down A Company’s HMRC Tax Affairs

If you are looking at how to close a limited company then concluding and closing down a company’s HMRC tax affairs is an important part of the process.

HMRC tax compliance involves two aspects:

1. The filing of returns to notify HMRC of a tax liability, repayment or relief claimed.
2. In the event of any liability arising, the payment of it.

Sorting out a company’s taxes is part of the process of the process of closing a trading company.

HRMC Tax Compliance

A company cannot close without ensuring HMRC tax affairs have been properly complied with.

This is not a matter of simply paying the most up to date tax bill or even closing a company with HMRC tax debts which typically will involve some form of insolvency procedure such as Liquidation.

HMRC tax compliance is fundamental to the ability to wind up any limited company, particularly when shutting down a solvent company. If there are compliance matters outstanding such as a tax return that has not been filed then a failure to do so can lead to fines, penalties and restoration of a dissolved company by HMRC with it placed into Compulsory Liquidation.

Final Accounts To Close Down A Company’s Corporation Tax Affairs

Where a company is concerned it will always need to be registered for corporation tax purposes.

It will therefore when looking to close down need to ensure that filings for corporation tax using the tax return, known as form CT600 are completed for all trading periods. This also applies to any income during a period after trading has ceased.

The remaining non-trading income will often be interest on bank balances which still also need to be reported on to HMRC in a return.

However, in order to file the CT600 a company will need to support the return with its final accounts. It therefore will need to prepare accounts up to the point at which no further transactions have or can be entered into. These final accounts after the most recent year-end are known as termination or cessation accounts. This will enable the company to support its final corporation tax return with corporation tax computations which are derived from the cessation accounts after making relevant adjustments for matters such as depreciation for example only.

A company may have a range of other HMRC taxes that it is registered for. Perhaps the two most common will be VAT and PAYE.

VAT Deregistration To Conclude Company’s VAT Tax Affairs

A company that trades and has a turnover for the last 12 months over £85,000 must register for VAT or otherwise must do so if it is expected annual turnover will exceed £85,000 in the next 30 days.

Once a company ceases trading to close it must no longer be registered for VAT as it no longer has an annual turnover over £85,000. It must therefore cancel its VAT registration. 

This process is known as VAT deregistration which requires the use of a VAT 7 form via an online process typically. Once the cancellation has been processed the company then has to submit a final VAT return.

Payroll Scheme Closure

A company that trades and has employees will have registered for a PAYE for employers scheme to account to HMRC for PAYE and National Insurance.

At the point where a company stops being an employer of staff who are made redundant, they need to be provided with their P45 forms. The final payroll submission needs to be filed with the tax paid within 17 days.

If any employees had benefits in kind then the final expenses and benefits returns P11D and P11D(b) may need to be submitted.