Corporation tax when a company goes into administration

When a company enters administration, its current accounting period ends the day before the administrator is appointed and a new one begins, under section 10 of the Corporation Tax Act 2009. The administrator becomes the company’s proper officer for tax and deals with HMRC and the returns. Corporation tax on gains from assets the administrator sells is an expense of the administration, paid ahead of the unsecured creditors, while tax owed for the period before appointment is an ordinary unsecured claim.

How does administration change the accounting periods?

Section 10(1) of the Corporation Tax Act 2009 lists the events that end an accounting period. Two of them are the company entering administration and the company ceasing to be in administration. Section 10(2) says that where a company enters administration, the accounting period is treated as having ended immediately before the day on which it does so. Section 10(3) defines entering administration by reference to Schedule B1 to the Insolvency Act 1986, or a corresponding procedure outside that Act.

HMRC’s Insolvency Practitioner’s Handbook, at section 29.4.2, puts it in practical terms: the current accounting period ends the day before the administrator is appointed, a new accounting period begins on the day of appointment, and later accounting periods end when the normal statutory triggers occur, such as the company ceasing to trade. Those triggers include 12 months from the start of the period, the company’s accounting date, and the end of the administration itself.

This differs from liquidation. Section 12 imposes fixed 12 month periods from the start of a winding up. Administration has no equivalent rule, and the administration does not by itself stop the trade, so the normal section 10 triggers keep running. The liquidation rules are covered in corporation tax during liquidation, and the underlying concepts in accounting periods vs periods of account.

Who is responsible for corporation tax returns?

Section 108 of the Taxes Management Act 1970 says everything a company must do under the Taxes Acts is done through its proper officer. Section 108(3)(a) makes the administrator the proper officer once one has been appointed, and section 108(4) deals with joint administrators: the proper officer is whichever of them is named in a notice to HMRC or, failing that, whichever one or more HMRC designates.

HMRC’s handbook at section 29.2 lists what the administrator should do after appointment: update the registered office to the administrator’s address at Companies House, get a copy of the company’s Unique Taxpayer Reference, check the corporation tax obligations for the type of insolvency, and file any returns needed. It says to allow at least 10 working days after updating the registered office before asking for the UTR online, and at least 15 working days for the written copy to arrive.

The CT603 notice to deliver is still issued to the company, but HMRC’s Cotax Manual at COM130130 shows it is recorded in the capacity of company administrator. The obligation that follows is explained in CT603 notice to deliver a company tax return.

How are the returns filed?

HMRC’s Cotax Manual at COM60040 says insolvent companies within a formal administration or winding up are excluded from the legal requirement to file online, unlike a solvent company in a members’ voluntary liquidation. HMRC’s handbook at section 29.5 says such companies can file online or on paper, but warns that the administrator should check the exemption applies, as a paper return sent when an online return is required may be rejected.

The handbook at section 29.6 adds that HMRC may insist on a full CT600 where there is a risk of loss of tax, or may agree the company’s position using management accounts where appropriate. This gives some flexibility where the books are incomplete, but it is HMRC’s decision, not the administrator’s.

How is tax on the administrator’s sales treated?

Rule 3.51(2) of the Insolvency (England and Wales) Rules 2016 sets the order in which administration expenses are paid. The last item, at rule 3.51(2)(j), is the amount of any corporation tax on chargeable gains accruing on the realisation of any asset of the company, irrespective of who effects the realisation. HMRC’s handbook at section 29.1 says that after the administrator is appointed, corporation tax, such as tax on gains or on interest earned by the estate, is an expense of the insolvency, and at section 29.6 that tax on capital gains realised by the office holder is payable as an expense.

In practice this means the tax on a profitable sale of property or a business is met from the realisations before unsecured creditors receive anything. Trading profits made while the administrator keeps the business running are taxed in the accounting period in which they arise in the normal way. Losses brought forward from before the administration, and losses of the administration period itself, may be able to reduce those profits under the usual rules, so the computation needs the pre appointment loss position, not just the administration receipts and payments.

What happens to tax owed from before the administration?

HMRC’s handbook at section 29.1 says corporation tax arising before the insolvency forms part of HMRC’s claim in the procedure. It is not preferential. HMRC’s briefing on its preferential creditor status says only certain taxes held on behalf of others, such as VAT, PAYE income tax, employee National Insurance, student loan deductions and Construction Industry Scheme deductions, rank as secondary preferential debts for procedures starting after 1 December 2020. It names corporation tax as an example of a debt that is not included, along with penalties and interest. Pre administration corporation tax therefore ranks with the other unsecured creditors.

What happens to losses and group relief?

HMRC’s handbook at section 29.11 says entering administration normally breaks the group relationship and means the company loses beneficial interest in its assets from the date the procedure starts, so from that date it cannot claim or surrender group relief. Group planning that relied on surrendering losses to a solvent fellow subsidiary needs revisiting at the point of appointment; see group relief for losses.

If the trade ends, the handbook at section 29.7 notes that terminal loss relief allows losses of the final 12 months of trading to be set against profits of the previous three years, with claims made within two years of the end of the period in which the losses arose. That can produce a repayment for the estate, as explained in terminal loss relief. The handbook at section 29.8 also says open HMRC enquiries are not closed automatically by the appointment.

What happens if the administration moves into liquidation?

Ceasing to be in administration ends an accounting period under section 10(1)(j). Where the administrator moves the company into creditors’ voluntary liquidation under paragraph 83 of Schedule B1, the administrator’s appointment ends when Companies House registers the notice, and the company is wound up as if a resolution for voluntary winding up had been passed on the day the notice is registered. From then, section 12 applies: an accounting period ends immediately before the winding up starts, and new 12 month periods run until the winding up is completed. How the administration itself ends is covered in company administration.

How might the periods work in practice?

Illustration only. A company with a 31 December year end goes into administration on 15 April 2026. The administrator trades the business for a few months and sells the freehold at a gain in September 2026, then moves the company to a creditors’ voluntary liquidation by a notice registered on 20 February 2027.

Accounting period	Why it ends	How the tax ranks
1 January 2026 to 14 April 2026	Company enters administration	Unsecured claim by HMRC
15 April 2026 to 31 December 2026	Accounting date, if accounts are still made up to 31 December	Tax on the freehold gain is an administration expense
1 January 2027 to 19 February 2027	Winding up starts on 20 February 2027	Administration expense for any tax on gains
From 20 February 2027	12 month periods until the winding up is completed	Liquidation rules apply

What mistakes come up most often?

• Applying liquidation rules to administration. Administration ends one accounting period and starts another, but there is no fixed 12 month cycle from the appointment date.
• Treating all corporation tax as an unsecured claim. Tax on gains from the administrator’s sales is an expense of the administration.
• Assuming HMRC is preferential for corporation tax. Secondary preference covers taxes held for others, not corporation tax.
• Continuing to surrender group relief. HMRC’s view is that the group relationship normally breaks when the administration starts.
• Losing the loss position. Without the pre appointment computations, losses that could shelter gains or support a terminal loss claim may be missed.

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Related Accountapedia entries

• Company administration
• What goes in cost of sales
• What happens to directors in administration
• Corporation tax rates explained
• Corporation tax for property investment companies

Sources

• legislation.gov.uk: Act 2009 c. 4, section 10
• legislation.gov.uk: Act 2009 c. 4, section 12
• GOV.UK: 29 corporation tax
• legislation.gov.uk: Act 1970 c. 9, section 108
• GOV.UK: Manual page COM130130
• GOV.UK: Manual page COM60040
• legislation.gov.uk: SI 2016/1024
• GOV.UK: Hmrc as a preferential creditor
• legislation.gov.uk: Act 1986 c. 45, schedule B1

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.