Taxation (International and Other Provisions) Act 2010 Schedule 7 Part 12

Banks etc. in compulsory liquidation — income tax charge on winding up receipts

Schedule 7 Part 12 (paragraphs 63–72) inserts new rules into the Income Tax Act 2007 dealing with how income tax applies to receipts arising when certain deposit-taking companies (such as banks) are being wound up by the court.

• Sums received during or after the winding up of an insolvent deposit-taking company are charged to income tax as "winding up receipts," provided they were not already accounted for in the company's trading profits before cessation.
• The rules apply where the company held a deposit-taking permission (or was an authorised EEA credit institution), has permanently ceased its deposit-taking trade, and was insolvent at or within 12 months of the start of winding up proceedings.
• Allowable losses, expenses and debits that would have been deductible against the trade profits — had the trade continued — can be set against the winding up receipts, except where they arise from the cessation itself.
• The company or its liquidator may elect, within two years of the end of the tax year of receipt, to have a winding up receipt taxed as if it were received on the date the trade ceased, provided the receipt falls within a tax year starting no later than six years after cessation.

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