With
effect from 1 April 2011 HMRC have required all Company Tax Returns to be filed
online, which means using specific accounting software that includes eXtensible
Business Reporting Language (XBRL) tagging to prepare and submit them.
Information about online returns can be found by clicking here.
Fortunately
there are some exceptions to that principle, most notably in respect of
insolvent companies. Companies that are
in a formal insolvency process, namely administration, administrative
receivership, CVA, CVL or compulsory liquidation, do not have to submit online
tax returns, but can continue to file paper returns. This is optional, so that as the
administrator, administrative receiver, or liquidator you, as the relevant
person, can either submit paper or electronic returns. The same applies for the directors of
companies that are subject to a CVA.
The
exemption applies to any return, for any period, whilst the company is subject
to the insolvency process. In other
words it applies to both to any returns that are outstanding as at the date of
commencement of the insolvency process, and those for any period whilst the
company is subject to the process. The
exemption from online filing also means that HMRC will be able to continue the
practice of accepting an ‘informal return’ from office holders in insolvency
procedures for any period.
The
statutory exemption applies only to insolvency procedures, so what about MVLs? Placing a company into MVL starts a new
accounting period, with the period between the end of the company’s last normal
accounting period and commencement of the MVL being referred to by HMRC as the
“stub” period. HMRC indicate that their
starting point is that the normal online filing requirements will apply, both
for accounts due in respect of normal accounting periods and the “stub” period. However, they also recognise that this
presents practical difficulties and so have issued some guidance to try and
assist IPs, which can be accessed by clicking here. In summary, that
guidance permits the liquidator to submit paper returns based on management or
similar accounts for any pre-appointment normal accounting period and the
“stub” period where the statutory date for filing falls due prior to the date
on which closure clearance is being sought, unless HMRC think that there is a
material risk of loss of tax. If they do
consider that there is a material risk of loss of tax then they will require
online returns supported by full accounts.
However,
in respect of post liquidation accounting periods, i.e. for each year
commencing with the date of the winding up resolution, then there is no exemption
and the liquidator must deliver an online return on behalf of the company. Where an IP works as part of a general
accountancy practice then they will have access to that accounting software,
but where the IP is an insolvency specialist they may not. Whilst free software is available from HMRC
it may be easier to outsource the preparation of the online return to a firm of
accountants, say the practice’s own accountants. Whichever approach is taken, the additional
costs of preparing online returns need to be factored in to any quote for
undertaking an MVL. Furthermore, if the
accountant used is part of your practice, or associated to it, you may need
specific approval from the members for the payment to be made to them since it
is a category 2 disbursement.
What
about the return for the post liquidation period up to the date that closure
clearance is sought where that period is less than a year, is an online return
required for that? The guidance makes it
clear that a company is only required to deliver a Company Tax Return to HMRC
if it receives a ‘notice’ on a CT603 to do so.
It is the CT603 that defines the required content of a Company Tax
return, i.e. online filing, and sets the statutory filing date, i.e. the time
when the return becomes legally due. In
the context of tax returns for pre-appointment periods the guidance also makes
it clear that it can accept paper returns in respect of “stub” periods where
closure clearance is being sought before the statutory filing date has been
reached, since at that time the return is not legally due and so cannot be
required. Whilst the guidance does not explicitly
say so, applying what it does say about the CT603 triggering the requirement to
submit an online return, then if closure clearance is sought within the first
year before the CT603 is issued that should allow the submission of a paper
return with the request for closure clearance and not mean that online accounts
need to be submitted. That is also being
borne out by experience in practice.
In
conclusion, the best solution is to ensure that closure clearance is obtained
from HMRC prior to the first anniversary wherever possible so that the case can
be closed without the need to submit an online return or issue an annual
progress reports.
