Tax implications of administration and liquidation

Produced by a

Owner-Managed Businesses

Guidance

This guidance considers the tax implications of a company going into administration or liquidation.

What administration and liquidation means for companies

Company going into administration

A company which is in financial difficulty may go into administration. An administrator is appointed to manage a company’s affairs whilst it is in administration. It usually continues to trade during the period of administration.

The function of the administrator is to fulfil several objectives:

•
the first of these is to rescue the company as a going concern
•
the second is to achieve a better result for the company’s creditors as a whole than would be likely if the company was wound up
•
the third objective is to realise property in order to make a distribution to one or more unsecured or preferential creditors

Insolvency Act 1986, Sch

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