Opening Pandora’s Box

KEY POINTS

• Companies in administration or liquidation will have tax bills.
• A close-investment holding company is close.
• A company in administration is not automatically a close investment-holding company.
• Difference between liquidation and administration.

With the increasing number of insolvencies tax practitioners may be faced with completing a tax return of a company in liquidation or administration. It is tempting to assume that such companies might not have any tax to pay.

However when a company goes into liquidation or administration an accounting period ends with the consequence that trading losses cannot be carried over to the next accounting period to be set against any capital gains which are made during the liquidation or administration.

Furthermore the company may have interest income from monies put on deposit pending distribution to creditors or rental income.

Tax is...