As part of our work to reduce the administrative burden on insolvency practitioners we are improving our process for when Companies House notify HMRC about an insolvent liquidation.

After receiving a notification of liquidation, we will update our system to make these records inactive. This will stop initial and annual notices to file (CT603) being issued, so you will not have to respond to those communications.

We will write and tell you that we have made the company’s Corporation Tax record inactive and provide you with the company’s Unique Tax Reference.

If during the period of liquidation, there’s been no activity giving rise to a charge under Corporation Tax, you will no longer have to submit nil Company Tax Returns or liquidator reports.

This will remain the case for the period of liquidation and, under normal circumstances, there will be no requirement to contact HMRC for tax clearance relating to Corporation Tax prior to closing your liquidation.

HMRC will only contact you if we require a Company Tax Return or any additional information.

In insolvent liquidations, you will need to be satisfied you have all outstanding tax matters closed before you move to have the company struck off.

The process for administrations and solvent liquidations remains unchanged.

What happens next

Over the coming weeks, the new letters stating the company’s Corporation Tax record is inactive and providing the company’s Unique Tax Reference will start being delivered.

Once delivered, if insolvency practitioners experience any issues in the initial few months please raise them with R3 or your representative body, who will contact HMRC to take forward.

Questions and answers

Question. Does HMRC’s new way of working only apply to notifications after the new process is implemented?

Answer. The new process will only apply to new insolvency cases.

For current insolvency cases the insolvency practitioner can inform HMRC that no future returns will be expected, then we will not normally issue an annual notice to file (CT603).

Question. What is the process for CT603s when there’s no liability for Corporation Tax?

Answer. Where there is no liability for Corporation Tax, the insolvency practitioner does not need to:

• file a nil Company Tax Return (CT600)
• send a liquidator report to HMRC’s Corporation Tax services

To reduce the administrative burden, we would expect insolvency practitioners to file a CT600 only when there is something to declare or in response to a request from HMRC, for example, if we send you a CT603.

Question. Where there is a Corporation Tax liability, how will accounting periods work?

Answer. These will continue to be based on the current accounting period rules normally applied to Corporation Tax.

Question. If a Corporation Tax liability exists in one period but not in others, does the insolvency practitioner have to submit further Company Tax Returns because one has been submitted for the first year?

Or are insolvency practitioners expected to file a CT600 for earlier accounting periods only when a Corporation Tax liability arises in a later period?

Answer. The insolvency practitioner should submit the return of the period where the charge is raised.

There is no requirement to complete further returns unless there are additional charges or a CT603 has been issued.

Question. What will happen when there are ‘local arrangements’ in place across firms where there is de minimis liability for Corporation Tax indicating no return is required, or payment made?

Answer. HMRC does not operate ‘local arrangements’ and returns are required in all cases where a liability exists.

Question. Which address will HMRC write to when confirming with insolvency practitioners that the Corporation Tax records are dormant?

Answer. HMRC will write to the Companies House liquidator address once records are updated with the insolvency details. This letter will include the Unique Tax Reference.

Question. If income is received post liquidation and a tax liability arises, when should a return be made?

For example, in a company voluntary liquidation if the company goes into voluntary liquidation on 1 January 2021 — is due to file tax returns to 31 December each year and income is received in March 2022.

Would insolvency practitioners be expected to submit a tax return for the year ending 31 December 2022? Or is there scope to shorten the period or file one tax return, at the end of the company voluntary liquidation to deal with all income at once?

Answer. This new process does not change established practices. The insolvency practitioner should shorten the final period.

Question. As tax is payable before a CT600 is due, how does HMRC propose insolvency practitioners obtain the tax payment reference normally stated on the CT603?

Can they be obtained over the phone or web chat while the company is marked as dormant or will insolvency practitioners have to write in to request it?

Answer. Insolvency practitioners can contact HMRC Corporation Tax: general enquiries by phone or webchat with their proposed accounting period dates and advisors will give them a tax payment reference number.

Question. If a tax return is filed, is the company automatically marked dormant again or does the insolvency practitioner have to contact HMRC to request this?

For example, if a return is filed for the year end 31 December 2022, would a CT603 be issued for the year end 31 December 2023 or would the return be treated as a one-off and not affect the overall dormant status?

Answer. Insolvency practitioners should submit the return for the period where the charge is raised.

There is no requirement to complete future returns unless there are additional charges or a CT603 has been issued.

Question. Insolvency practitioners are asked to satisfy themselves that all outstanding tax matters are closed in insolvent liquidations, before moving to have the company struck off.

Does the same apply to compulsory winding up orders?

Answer. HMRC classify this as an insolvent liquidation.