Q: When does a company cease trading?
Sep 29 2009
Answered by: Clive Lewis Ask a question
A company can cease trading and still be registered at Companies House. These are two separate issues here. If the company does nothing – i.e fails to submit accounts to Companies House, it will be struck off eventually but the directors could be penalised and may not start a company in the future. For more on getting a company ‘struck off’ (being removed from the register, or ceasing to exist) see below A.
HM Revenue and Customs will not allow a company to be struck off if up to date accounts have not been submitted. So being struck off is not an alternative to paying corporation tax. The directors may also be personally liable if the accounts are not submitted to HMRC. For more on winding up the company for corporation tax purposes see below B.
A. Applying to the Registrar of Companies to have a limited company struck off the register
An application for voluntary striking off can only be made by the company, and must be made on the company’s behalf by its directors or a majority of them. For example, the company may not make an application for voluntary strike off if, at any time in the last three months if it has:
• traded or otherwise carried on business
• changed its name
• made a disposal for value of property or rights that immediately before ceasing to trade or otherwise carry on business, it held for the purpose of disposal for gain in the normal course of trading or otherwise carrying on
business.
A company can apply for strike off if it has settled trading or business debts in the previous three months.
For further information go to the Registrar of Companies publication Strike off, Dissolution and Restoration (GP4).
B. Winding up your company for corporation tax purposes
You need to know when the winding-up process for your company has started – this can affect your corporation tax payment and company tax return filing deadlines and requirements.
The winding up of your company for corporation tax purposes normally starts when:
• your company goes into administration
• 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; for example, following an application by an unpaid creditor such as HMRC, if you don't pay your company's corporation tax (see separate section below)
• a liquidator is appointed
Winding up and corporation tax 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.
If your company is in the process of being wound up, it's still subject to Corporation Tax paying and filing requirements. For example, 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.
For further information see HMRC’s 'Selling or closing your company and corporation tax'.
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