So, you want to liquidate the Company and have a s455 charge to deal with. What happens?

First, the mantra: We don’t provide tax advice. What follows however is our practical approach.

The key bit is that HMRC will accept that we can shorten the initial accounting period in the liquidation with the intention being (Covid 19 aside) that we can complete the Liquidation within 15 months. It should be noted that without this interjection a basic unravelling of a s455 charge would lead to a Members Liquidation lasting significantly longer than two years. Apparently HMRC (nor us for that matter) want these basic, fundamentally tax compliant files open for that long.

The action of requesting and shortening the tax period includes notification to HMRC of the distribution of members funds within the first few days of the liquidation. This allows the S455 position to be unravelled.

If the S455 charge has not been paid then it is a question of awaiting HMRC’s confirmation that they accept the shortened accounting period and accept the contra (i.e. they accept the S455 amount no longer needs to be met). All that is left then is to calculate the statutory interest for the period from the liquidation date to the date the loan was repaid. This is usually only a few days.

If the s455 charge has been paid then, when we are shortening the initial accounting period, we request the re-payment authorisation of the S455 charge.  At this point it’s a matter of waiting for the wheels within HMRC to turn. Once the reclaim period has passed a form L2P needs to be submitted which triggers the refund of the monies.