Help - Limited Company Closure & Final Corporation Tax

martin_wren

One of my clients applied to dissolve their limited company on 1st December 2015 which was confirmed as being completed by Companies House on 8th March 2016. I compiled the final company accounts which covered the period December 2014 to November 2015 and calculated the corporation tax due on the profits made during this period.
I had previously completed the filing of the CT600 online through the HMRC Corporation Tax for Agents service but, following the closure my client’s company, this facility was no longer available. I phoned the HMRC Corporation Tax helpline and was informed that I now needed to send the company accounts and tax information by post which I did with a covering letter to explain the closure of the limited comapany etc. I followed this up with a phone call, two weeks later, to the HMRC agents helpline and was then informed that HMRC are not expecting any final Corporation Tax payment as the limited company had now been dissolved in March 2016. I queried this as I would've thought HMRC would expect tax to be due on the final year of trading up to the end of November 2015 but was told that HMRC do not have a record of any payment being due from the limited company on their system.
Could anyone provide some advice on whether I am right in thinking that my client should still have an outstanding tax liability for the final trading period? I don't want to inform my client that no tax is due and then HMRC later realise that they have overlooked the final tax due and send my client a demand for payment.
Thanks for any advice if anyone has had a similar experience when dealing with the closure of a limited company.

Martin

rwb

The company is a separate legal entity to your client (the individual) HMRC have an opportunity to object to any strike off of a company - as do any creditor - they haven't so their only recourse would be to reinstate the company. How much CT are we talking as they aren't likely to bother for a small amount. Presumably your client has also lost access to the funds in the company bank if strike off is complete?

Basically you've done it all our of order, file final accounts and tax return then strike off.

martin_wren

Thanks rwb for the advice
The CT calculation was around £2.5k which I thought HMRC would be interested in collecting but as you say if they no longer see the company as a legal entity they may regard this as a tax liability to now be passed through to my client as an individual.

With hindsight you're right it would've made more sense to ask my client to hold the closure of the company until the final accounts and tax return had been completed with HMRC. First time I'd encountered this one and knowing this now I'll know which way to go about it if the same event happens in the future

MarieNoelle

Agree with rwb. When filing the form to strike off the directors had to confirm that all outstanding debts have been paid, including the Corporation tax. It looks like HMRC didn't object!

martin_wren

Thanks very much for the advice mrme89

Monsoon

I agree with previous advice. Once the company is dissolved it can't file returns. HMRC should have objected to the strike off if they were expecting tax (they often don't), and the final CT return should have been sent in and paid before the DS01 was filed. As HMRC was a creditor, then a copy of the DS01 should have been sent to them when it was filed, which is an obligation of filing said form.

If the director has the tax money (presumably in his personal account) then technically this is likely an overdrawn loan account which he would have to pay back if the company was restored as it is a debtor of the company.

However, in practice it's likely that he has gotten away with not paying the tax. HMRC are very unlikely to restore the company for a relatively small amount of money.

martin_wren

Thanks very much Monsoon. Your advice helps to clear up my mis-understanding on this issue.

Ellabobbin

Morning, I have seen something similar happen where the director has innovertently jumped the gun with the strike off - interested to see if anyone thinks there is a money laundering issue here?

Monsoon

Ellabobbin said:

Morning, I have seen something similar happen where the director has innovertently jumped the gun with the strike off - interested to see if anyone thinks there is a money laundering issue here?

If he has "inadvertently jumped the gun" then that suggests no deliberate attempt to defraud. Therefore there is no MLR issue. However, if the dissolution has not gone through and you are aware there is tax due, depending on your relationship with the director, you may be ethically obliged to point this out. And if he then was to say "Nah, I'll just leave it going through and hope I don't have to pay the tax" - then you would have cause to make a ML report, because there is now intent.

Ellabobbin

Thanks Monsoon - that is in line with my thinking.

I'm at a loss with how HMRC seems to be letting these applications slip through their fingers..

Monsoon

Because HMRC is underfunded by the goverment.

Monsoon

As is the NHS, the police, etc etc etc #bloodytories

Ellabobbin

So embarrassed to have spelt 'inadvertently' incorrectly. In my defence I was unwell, hence reading through old posts to pass time!

I think the main problem is that it is simply too easy for anyone to form a limited company.

So many do not realise that the company is not merely an extension of themselves and might trade for 12 months before realising they need an accountant, merrily helping themselves to company funds as they go.

Then again too many accountants just mop up behind them without explaining how they should be conducting themselves...

And then too easy to strike it off without taking advice, thinking that any liability will fall back on themselves...

I have actually had someone state that the ltd co was them t/a xxxxx ltd...

Err, no!

rwb

Sadly not my own analogy - came from an Awebber a while ago but I copied it as I liked it so much:

Registering a company is a bit like conceiving a baby - it is deceptively easy, done in a moment and all for the price of a few glasses of wine.

Nine months after conceiving a baby, you just won't believe how complicated and difficult your life suddenly gets. Be assured that having a company is just like that. Get an accountant, quick.

Ellabobbin

Brilliant analogy!

It is far too easy - not sure what the answer is but there has to be a better way.

I sometime feel like a record on repeat...

mskaat

That goes a long way to show that not all freedom is necessarily a good thing. There should be some form of control to achieve the intended objectives. Regulation? There is by far more regulation to deal with. Enforcement? There is too little policing and enforcing of rules and regulation. Training? It is one thing to learn and train, and it is another thing to put it into practice when there is too much freedom with little supervision and enforcement.

PatsyC

Hi
I am not sure if this is an old discussion or not but I have a similar query regarding this topic so here goes anyway.
We ceased trading on 31st March 2017, four months prior to our financial year end. We informed HMRC & Companies House that we were doing so and told them that we would file the legal documentation when we had completed everything i.e. after the three months of no trading had happened. We then submitted the DS01 and the final accounts to 31/3/17, no Corporation tax due. Companies House have now completed everything with the dissolution. During that time however we received a CT603 for the period 1/4/17 to 31/8/17. I am now wondering whether we would still have to submit accounts for the period up to and including the date of disssolution, can anyone help please?
Thank you

mskaat

A simple letter to HMRC informing them you had ceased trading quoting the first letter or attaching a copy. Sometimes letters like CT603 are automatically generated if the appropriate dates and information had not been inputted into the system.

PatsyC

Thank you, I will do that