Can't Pay Corporation Tax - Advice!

[essexbusiness]

Hi,

I was hoping someone could give me some advice.

I started my web design business in 2008 and managed to get some contracts with my local council for work, along with some other small businesses. At the end of the year we made a profit and our corporation tax was £2,100 - something I thought would be easy to pay with the profit we had acquired.

In order to keep hold of the big contracts I had to pay out most of the money left from the profit on project related costs and advertising/promotional material to help expand.

The council then pulled out of the contracts because of a 'change in policy' for outsourcing marketing related work - leaving me with only a very limited revenue stream that doesn't cover all of the outgoings.

Now I'm left with a £2,100 tax bill that needs to be paid soon and every month money comes out of the account because we have 12 month commitments with suppliers!

The company has assets shown in the accounts as £1,500~ (though if everything was to be sold I'm sure I could only make £500 or so), we have no overdraft but this month the bank account shows -£300.

I know I should have managed things better, but things didn't quite go as well as expected. I have no way of raising £2,100 quickly - though I've tried my best of the past few months to get new work in.

We have no premises - I operate from home. I was planning on dissolving the company this year to go to university, but then this happened!

Any advice for me? :(

[elainec100@cheapaccounting]

Sounds like if what you say is correct then you may have made a loss this year.

So my advice - get an up to date set of accounts, do a draft CT calc for current year. If this shows a loss then

Phone HMRC:

http://www.hmrc.gov.uk/pbr2008/business-payment.htm

Explain CT due for last year will be reduced by current year's loss - arrange a plan with them.

I cannot be more specific as there is not enough detail here.

[essexbusiness]

Thanks for your quick reply!

This current year doesn't end for me until July - so could I base the loss purely on the year up until now?

What kind of loss would I need to be running at to balance out the £2,100 debt?

Thanks so much! :)

[elainec100@cheapaccounting]

Loss of approx £10k

Work out where you are at them still call them.

[essexbusiness]

Loss won't be anywhere near that - I've stopped all operations so no money goes out unless it's contracted (phone bill, hosting, banking).

I'll give them a call and let them know - hopefully I can get some money to come in soon to pay some of it off.

What would be the alternative? I'm looking to cease trading and dissolve asap so that I can study, so would I need to pay off all the debts first?

Thanks again for your help!

[Jaykay]

They are quite helpful and will spread the payments if you ask. Some may suggest letting the Inland Revenue close the company by letting them issue a winding up petition but not the best way to go!

You can close the company before paying the debt.

[DFL]

Where abouts in Essex are you based? We are in Basildon so if you want to pop in for a chat about possible solutions then feel free to contact me.

No charge and not fishing for work, genuine offer.

www.dormerfinance.co.uk


Regards, Jason

[Spongebob]

I've stopped all operations so no money goes out unless it's contracted (phone bill, hosting, banking).

I'll give them a call and let them know - hopefully I can get some money to come in soon to pay some of it off.

What would be the alternative? I'm looking to cease trading and dissolve asap so that I can study, so would I need to pay off all the debts first?



First of all, stop worrying. You don't owe HMRC anything - the company does. In law the company is treated as if it was a totally different person.

If the company has ceased trading, has debts but has no income or assets, then it is insolvent and needs liquidating.

The easiest way to do this is to do absolutely nothing and wait for HMRC to wind the company up, after which it will be liquidated by the Official Receiver at no cost to yourself. From what you have told us you are at no risk of being held personally liable for the debts of the company as you have clearly done nothing wrong.


Some may suggest letting the Inland Revenue close the company by letting them issue a winding up petition but not the best way to go!

Ignore this.

The whole point of limited liability companies is to protect shareholders and directors from personal liability for the company's debts should it become insolvent. There is no reason whatsoever why you should be expected to pay the debt yourself. It's not your debt. The law does not expect you to pay it.

Concentrate instead on your studies.

Bob