S455 refund on Company under voluntary liquidation

S455 refund on Company under voluntary liquidation

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Hi all

First question on here!

A client has gone into voluntary liquidation and has an overdrawn DLA. They paid over s455 tax a few years ago. My question is, as the company is closing and the DLA will effectively be classed as a capital repayment, am I correct in concluding that the DLA has effectively been paid off/written off and therefore the s455 tax paid a few years ago is due back to the company?

If so what is the best course of action to get the refund, would I write in to request this or would I deduct this from the CT600 as a relief.

Any thoughts are appreciated.

Thanks 

Replies (16)

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Portia profile image
By Portia Nina Levin
15th Jan 2015 11:45

Catch 22

See http://www.hmrc.gov.uk/manuals/ctmanual/CTM36210.htm

The loan is treated as repaid when, and to the extent that, the assets are distibuted, but you cannot fully distribute the assets, until you have them in a distributable form.

You cannot dissolve the company until you have the section 458 refund. You cannot get the section 458 refund until you have dissolved the company.

I have known HMRC accept that where the right to receive the section 458 refund has been legally assigned by the company to a shareholder, they will make the repayment to the assignee. That was in the days that HMRC was not just a machine though.

The liquidator might make an interim distribution and credit it (or part of it) against the loan, in order to generate a section 458 refund. The final distributions could then be made once the refund is received.

You either claim in writing, or you complete form L2P, here: https://www.gov.uk/government/publications/corporation-tax-reclaim-tax-p...

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By russab2000
15th Jan 2015 12:14

Thank you for the information, as usual there is always an enjoyable process to go through

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Replying to Tim Vane:
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By JamesAnd
15th Jan 2015 12:34

If you complete a set of accounts and CT600 up to date ceased trading, showing the DLA has been repaid, then HMRC will issue the repayment. Keep the company bank account open until the repayment has been received as it can be a bit of a nightmare getting HMRC to re-assign the repayment to another payee.

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Replying to Samantha20:
Portia profile image
By Portia Nina Levin
15th Jan 2015 13:10

Surely?

JamesAnd wrote:

If you complete a set of accounts and CT600 up to date ceased trading, showing the DLA has been repaid, then HMRC will issue the repayment. Keep the company bank account open until the repayment has been received as it can be a bit of a nightmare getting HMRC to re-assign the repayment to another payee.

You are not suggesting false accounting? There ought to be a law against it.

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Replying to lionofludesch:
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By JamesAnd
15th Jan 2015 14:10

Sorry , but I am not sure how you get that inference from my comments.?

A final set of accounts and CT600 will have to be submitted anyway as otherwise, HMRC may object to the company being struck off. In the accounts/CT600 you show/state how the dla has been repaid (write off/release/dividend or by whatever means) and this then triggers the 455 repayment.

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Portia profile image
By Portia Nina Levin
15th Jan 2015 14:19

But

The company is in liquidation (so has ceased trading), but the loan has not been repaid.

So the only way you could file a CT600 showing it as repaid would be to lie.

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Replying to Dan Heelan:
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By JamesAnd
15th Jan 2015 14:53

I am assuming that voluntary liquidation did not take place straight after the last CT600 and accounts had been submitted so therefore, unless dormant, there is still a set of both too complete.

The original question stated that the DLA is to be treated as written off as a capital repayment. I see no reason why this can't be shown as such in the final period of accounts as having been done on day of liquidation. There would just need to be board minutes to state this had been agreed.

I believe it would have been different if there had been a statutory liquidation and thus the liquidators ask for a CT600 for the period of liquidation. The s455 would then be repaid to the liquidators to be used to repay creditors

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Replying to bernard michael:
Stepurhan
By stepurhan
15th Jan 2015 15:29

The future

JamesAnd wrote:
The original question stated that the DLA is to be treated as written off as a capital repayment.
Is to be, not has been.

Until such time as the loan account has been cleared, no CT600 stating it has been cleared should be submitted. Assuming that everything is in place in time is dangerous.

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Replying to Tax Dragon:
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By JamesAnd
15th Jan 2015 15:59

I sort of agree.

However, from the date the voluntary liquidation decision is made the company in affect no longer exists and that the company is now only in the process of settling creditors and distributing assets. HMRC do not expect any accounts or return after this date provided definitely ceased to trade. I am only referring to a return if there has been trading since the last return and the date of VL. Although there is a chance HMRC would not require a return. COM130050 explains this process. Hopefully, I am reading it correctly!

A simple letter saying that since the last return and accounts no trade has been undertaken and if need be, enclosing an analysis of the company bank account showing no transactions except settling debtors and creditors, will normally suffice with HMRC.

They will then issue the repayment and hence my advice to not close the company bank account until repayment issued, although I think there is a form that can be submitted asking the repayment to be made to a nominee.

I am assuming that in this scenario the reserves are less than £25k and that these are being distributed to the participator with part being used the clear the DLA. He pays 10% CGT on the gross not the net assuming he qualifies for ER and over AE.

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Replying to Matrix:
Stepurhan
By stepurhan
15th Jan 2015 16:21

I sort of disagree

JamesAnd wrote:
However, from the date the voluntary liquidation decision is made the company in affect no longer exists and that the company is now only in the process of settling creditors and distributing assets.
If the company effectively does not exist, then there is no entity to settle creditors or distribute assets. Since there is still an entity to do both of these things, the company must still exist.

In fact, if those assets include debtors, then the company will still seek collection of your debtors. If you are saying that the liquidation decision means that the DLA debtor ceases to exist immediately (because there is no company to repay it to any longer), why would the same not apply to every other debtor?

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Replying to Jfg:
Stepurhan
By stepurhan
15th Jan 2015 16:50

Dates

Red Leader wrote:
As usual, I may have missed something.
Only, unless I've missed them, that we don't know if those dates are valid. If the CT600 has to be filed before the event you've dated 30.4.15 has occurred, then you cannot make the s458 claim on it.
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Replying to lionofludesch:
Stepurhan
By stepurhan
15th Jan 2015 16:57

Trading?

JamesAnd wrote:
Yes, there may still be a period of settling debtors and creditors but this is not classed as trading if this is all the company is now doing
What has trading got to do with the existence (or lack thereof) of a debtor?

You acknowledge that there is a period of settling debtors and creditors after the company ceases trading. You still haven't explained why other debtors can carry on existing in this period, but the DLA ceases to exist instantly.

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Replying to Slim:
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By JamesAnd
15th Jan 2015 19:54

Hello - I was making the case regarding if a company is trading or not as that is relevant to the completion of a CT600 and thus the "normal" mechanism for reclaiming s.455.

I didn't mean that the DLA ceases automatically because as I have stated, there needs to be the appropriate board minutes agreeing the method of repaying the DLA.

These board minutes and the other documents I have mentioned can then be submitted to HMRC, in the absence of a CT600, to obtain the s.455 repayment. You are right, there may still be other debtors but this doesn't need to hold up the s.455 repayment claim. Indeed, there may also be creditors to be settled which could be a reason for needing the s.455 repayment.

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Portia profile image
By Portia Nina Levin
15th Jan 2015 16:26

The £25K does not matter

For an MVL.

And you seem to be suggesting that any income (eg bank interest) received during the liquidation is not taxable.

The OP is proposing that the amount owed by the shareholder is distributed to the shareholder and thus ceases to exist that way.

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Replying to whitevanman:
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By JamesAnd
15th Jan 2015 16:57

Hi - but I thought that if you want capital treatment (the old ESC16) of the reserves you can only do this via a voluntary liquidation if reserves less than £25k. Otherwise, you have to go through a formal liquidation to get capital treatment. The £25k is designed to save smaller companies the costs of liquidators (although I note in a subsequent reply the OP has said a liquidator has been appointed.

No not suggesting that at all. As don't believe the company would be classed as dormant if still receiving interest so a CT return would still have to be completed.

Agreed with your final point - the company simply pays him the net amount after clearing the DLA.

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Portia profile image
By Portia Nina Levin
15th Jan 2015 16:39

You have not missed anything

Except that the section 458 relief is not repayable until the date that the tax is due for the accounting period.

The company may have ceased having accounting periods (which is not foreseen by section 458), or its next accounting period might not end until as late as 28/2/16, meaning that the repayment will not be due until 1 December 2016.

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