Help If You Can

[urquhart]

This is the first time i have posted, i would be grateful for some advice. We are a ltd company and owe hmrc £40k, they have agreed time to pay but our sales have dropped so much over the last 6 months we dont think we can keep up the repayments. We now think all we can do is to liquidate the company, will our bank allow us to keep on paying the loan we have with them, it is for £100k I have personally guaranteed it and dont want to lose our house. we set up another ltd company sometime ago to diversify so hope we might be able to go on to trade again.

any advice would be most welcome.

[jbell2210]

Speak to HMRC and try to renegotiate your payment plan. Ultimately they want their money no matter how long it takes so lower repayments is going to be preferable to them than liquidation. Many companies have experienced cashflow problems in the past year and like it or not they are having to be more and more flexible. I dont know about the bank loan it will depend on the terms of the loan agreement but assumably if you have guaranteed it then you will be expected to continue the payments on it.

How did you get into that much debt with HMRC in the first place? Did your accountant not make you aware of pending tax bills?

It may be worth you talking to an insolvency specialist to find out more about what your options are. If you decide to keep your company going you should also speak to your accountant or a business advisor about ways to increase your sales.

[urquhart]

Thanks for taking the time to read and reply to my post.

I am afraid to speak to them again they told me that to get more time to pay they would need to do an in depth 14 page questionaire

I want to try to keep paying the bank but am worried if we liquidate the company the bank will call in the loan, and will not let us keep making the monthly payments.
We owe the money for unpaid PAYE, we did a lot of work for a developer who in the end could not pay us and some smaller contracts have struggled to pay us properly. We thought that we would be ok as we normally do £250k of sales between jan and April but that has dropped dramatically this year so we dont have the expected funds.

Our accountant is useless but as we owe them money we dont think any other accountant will take us on, she has just given us a bill for £2k for our 6 monthly figures.
We have never had a problem with sales before but in our local area the end of last year and the start of this one has been dire for business.

[Geoff T]

OP - everyone is trying to rip you a new one IMO - a Londoner friend of mine would say

"they're trying to make you to drop your draws"

(Coarse fellas from London are we ;))

point 1 - any contract with this accountant? 2k for 6 mths accounts is a rip IMO - I'd question it...

point 2 - DO NOT avoid the HMRC - they will HAVE YOUR HOUSE if you bury your head in the sand

point 3 - don't rely on the bank... they will be snapping at HMRC's heels for a slice of the leavings - if any - after HMRC are done with you...

point 4 - you need an URGENT review of your business plan - and if it's out of date (or non existent!:eek:) you need to sort that too!...

Best of luck...

[urquhart]

Thank you for replying,
We dont have a contract with the accountant, at least i dont think so i will check. Do you think the accountants fees are over the top?
Can HMRC take our house if we are a ltd company.
Would the bank negotiate if we liquidated the company, to allow us to keep paying back the loan.
We are making our staff redundant on Friday as part of our plans to restructure the business.

[Geoff T]

Thank you for replying,
We dont have a contract with the accountant, at least i dont think so i will check. Do you think the accountants fees are over the top?
Can HMRC take our house if we are a ltd company.
Would the bank negotiate if we liquidated the company, to allow us to keep paying back the loan.
We are making our staff redundant on Friday as part of our plans to restructure the business.

I'll bet you the fiver in your pocket OP that you DO have a contract with your accountant...

And yes they could take your house IMO - you mentioned a personal guarantee in your first post - one creditor operates like the other, at least HMRC + the banks do!

SEEK help! that's my advice - citizens advice if nothing else...

ps - do it wrong, and my prediction is that the fiver you have will all you have left - and you'd have to have kids to keep it ...

sorry to be a scaremonger - but the PG means your sweetmeats are on the line here...so it's not worth looking to resolve without formal (not the i'web) advice - safeguard your home and family!!

[urquhart]

Thanks

We have an insolvancy accountant coming for a meeting tomorrow, i just wanted to get as much info and advice as possible, i thought there might be people on here who have been through the same thing.

We have only given a personal gaurantee to the bank so i am unsure if this would have anything to do with hmrc.

If anyone out there has any experience of this i would be glad of their replies.

[Jenni384]

Just want to say - £2k might be reasonable depending on the scope of the work. Without knowing what the accountant is doing, we can't tell if it's reasonable or not.
If it's the usual compliance work for year end, it may well be on the high side. If it's bookkeeping as well and there are quite a few transactions, then it might be very reasonable. It's impossible to tell.

OP, you'll get some good advice from the folk on here, hopefully Spongebob will be around soon.

The personal guarantee to the bank is an entirely separate issue to the HMRC debt.

Does the company have any assets? How much are they worth compared to the debt?

Is the company solvent? If it's not, you may have to cease trading.

[urquhart]

Thank you for replying, the £2k s for 6 months figures this was after £3.500 last November for our year end accounts and it doesnt involve bookkeeping, although we might not have been the best at keeping our accounts system organised, we didnt like it but have changed it recently.
There are no real assets just some stock, the premises are leasehold.
We are due money in but not as much as we are due out, at the moment

Yes I am hoping spongebob will respond as i have been following this forum for sometime and they appear to have a lot of knowledge.but i am grateful to you and Geoff t, i cant believe that people take time out to give strangers advice, it does restore my faith in people and that has been tested to the limit for the last year.

[DFL]

The personal guarantee that you have given the bank will definately be called in if you liquidate the company.
As Jenni says - are there any assets in the company?
Wise move to get an IP in tomorrow, make sure that you give him/her the full facts and don't hold anything back.
You will have an engagement letter from the accountants which will detail the terms of your arrangement - you will not be tied in and can leave them for a cheaper firm at any time should you require - though if they are pro actively helping you through this period then sometimes it is worth paying more (though does not sound like it in this case).
If you genuinely belive that you restructure and trade out of this then there's nothing to lose by doing the questionairre and approaching HMRC - they are being helpful to responsible businesses at present. If you don't believe that you can turn things round then pull the plug.
Ask IP about alternatives to insolvency.

Good luck.

[DFL]

Sorry, posts crossed so see you answered the question re assets.

[David Griffiths]

point 1 - any contract with this accountant? 2k for 6 mths accounts is a rip IMO - I'd question it...

You have absolutely no basis for making that comment. This is not a two penny company but a business with a turnover of over a million, extrapolating the OP's figures. The OP has also indicated that the bookkeeping is not perfect. I've got companies that we charge that kind of fee, and they are certainly not being ripped off. Perhaps the charge is high, perhaps not but you definitely do not know.


point 2 - DO NOT avoid the HMRC - they will HAVE YOUR HOUSE if you bury your head in the sand

How? This is a limited company and the shareholders have no liability for the company debts. The OP has come on here looking for constructive help, not groundless scaremongering. The only part of that comment that is correct is the advice not to ignore HMRC - speaking to them is always better.



point 3 - don't rely on the bank... they will be snapping at HMRC's heels for a slice of the leavings - if any - after HMRC are done with you...

In practice the bank will simply want to recover their debt, and they are normally not in the business of putting people out on the street. I've usually found that they are quite happy to talk through the problem and come to an arrangement. In fact, it's not unknown for them to accept an offer of extended payment without charging interest. Not common, but not unknown.


For the OP, ignore responses like Geoff's and take notice of the much more relevant advice from Jason (DFL) Speak to somebody about the problems and come up with a constructive plan, which doesn't involve waiting for the bank to call in the guarantee but involves you in going to them with constructive proposals

[DebtAdvisor]

Thank you for replying, the £2k s for 6 months figures this was after £3.500 last November for our year end accounts and it doesnt involve bookkeeping, although we might not have been the best at keeping our accounts system organised, we didnt like it but have changed it recently.
There are no real assets just some stock, the premises are leasehold.
We are due money in but not asp much as we are due out, at the moment

Yes I am hoping spongebob will respond as i have been following this forum for sometime and they appear to have a lot of knowledge.but i am grateful to you and Geoff t, i cant believe that people take time out to give strangers advice, it does restore my faith in people and that has been tested to the limit for the last year.

If you want second opinion you can PM me.

[Spongebob]

Thank you for replying, the £2k s for 6 months figures this was after £3.500 last November for our year end accounts and it doesnt involve bookkeeping, although we might not have been the best at keeping our accounts system organised, we didnt like it but have changed it recently.
There are no real assets just some stock, the premises are leasehold.
We are due money in but not as much as we are due out, at the moment

Yes I am hoping spongebob will respond as i have been following this forum for sometime and they appear to have a lot of knowledge.but i am grateful to you and Geoff t, i cant believe that people take time out to give strangers advice, it does restore my faith in people and that has been tested to the limit for the last year.

First of all, ignore completely the bollox talked by the bloke above about HMRC taking your house for unpaid PAYE.

The whole point of a limited company is that the directors and shareholders are not personally liable for the company's debts. So rest assured that HMRC are no threat whatsoever to you personally.

The bank of course is another matter, as you have personally guaranteed the loan. As David says though, they will be more interested in the loan being serviced than in throwing you out on the street.

You need to keep as much money as you can to get your new company up and running and so to service the bank loan, so stop all payments to HMRC immediately. Unless you are on particularly good terms with your landlord, clear all your stock out of the rented premises before informing all creditors that the company has ceased trading.

Complete all existing contracts and initiate any new ones via the new company. Find smaller short-term premises if you need them; otherwise work from home. More detailed advice on getting your company wound up for free can be found in my posts on various other threads - I'm sure you've read them already. PM me if you need specific help.

The upshot is that you can be up and running imediately as NewCo with no debts to worry about other than the bank loan. OldCo will be wound up and all its debts written off. Your customers will notice nothing other than a change of company name. It happens all the time.

Cheers
Bob

[Spongebob]

point 2 - DO NOT avoid the HMRC - they will HAVE YOUR HOUSE if you bury your head in the sand


This is dangerous rubbish of the highest order.:eek:

They will not have your house because you do not owe them any money - the company does!

Avoiding HMRC in your circumstances is the very best thing you can do. It is not burying your head in the sand; it is a positive tactic.

You want HMRC to wind the company up, to save you the expense and hassle of appointing an IP to liquidate it. The best way to achieve this quickly is to ignore them completely. Just make sure that all assets have been removed to a place of safe keeping.

[KM-Tiger]

This is dangerous rubbish of the highest order.:eek:

They will not have your house because you do not owe them any money - the company does!

Avoiding HMRC in your circumstances is the very best thing you can do. It is not burying your head in the sand; it is a positive tactic.

You want HMRC to wind the company up, to save you the expense and hassle of appointing an IP to liquidate it. The best way to achieve this quickly is to ignore them completely. Just make sure that all assets have been removed to a place of safe keeping.

Thanks are due, once again, to Spongebob for good sound advice.

From this thread, and others in the last few months, it's clear to me that when a company cannot meet its debts it's hard for business owners/directors to know what to do, or to get good advice. And myths abound, such as HMRC being a priority creditor or being able to hold a director personally liable for a Ltd Co's debt.

It would be a great service to businesses if this forum had a sticky "What to do if your company cannot meet its debts" thread.

[Spongebob]

From this thread, and others in the last few months, it's clear to me that when a company cannot meet its debts it's hard for business owners/directors to know what to do, or to get good advice. And myths abound, such as HMRC being a priority creditor or being able to hold a director personally liable for a Ltd Co's debt.

It would be a great service to businesses if this forum had a sticky "What to do if your company cannot meet its debts" thread.

I agree entirely.

Many months ago I proposed an 'Insolvency' forum. I was told that this was unneccessary as people here didn't run into financial difficulties!

It is clear that there are many owners of small businesses facing insolvency who do not know which way to turn. There is very little good advice out there; accountants are largely clueless when it comes to insolvency and suggest seeing an insolvency practitioner!:eek: This is invariably the very worst thing that one can do.

My preference would still be for a seperate forum to discuss problems of insolvency, but if a sticky thread is the best we are going to get I would be happy to initiate one.

[urquhart]

Thank you all,
We feel a lot calmer this morning after reading the latest posts, the way our business is set up we need to trade from the same premises,
we have a showroom trhat has been specially adapted,it needs to be to display what we sell, it cost a considerable amount to do and the business has traded there, for 12 years, thankfully we have managed to keep up to date with the rent, our landlord takes no prisoners and the first time we were late paying we had a solicitors letter 2 days later.

Spongebob do you think we can trade with the new company from the same premises, what could the consequences be?

[David Griffiths]

I agree entirely.

Many months ago I proposed an 'Insolvency' forum. I was told that this was unneccessary as people here didn't run into financial difficulties!

It is clear that there are many owners of small businesses facing insolvency who do not know which way to turn. There is very little good advice out there; accountants are largely clueless when it comes to insolvency and suggest seeing an insolvency practitioner!:eek: This is invariably the very worst thing that one can do.

My preference would still be for a seperate forum to discuss problems of insolvency, but if a sticky thread is the best we are going to get I would be happy to initiate one.

I'd agree with that. There are certainly more queries on here about insolvency than about cashflow, which does now have a forum of its own. Nothing to do with the fact that there is a sponsor, of course.

You could even have a subforum of insolvency "I spent all of the corporation tax money so what do I do now?" ;)

[Spongebob]

Spongebob do you think we can trade with the new company from the same premises, what could the consequences be?

Yes, but it's a bit more complicated.

I'll have a think about it today and get back to you later. PM me your phone no if you want a chat.

[urquhart]

Yes, but it's a bit more complicated.

I'll have a think about it today and get back to you later. PM me your phone no if you want a chat.

Hi Spongebob
I have sent you a pm i hope you get it as i am new to this and wasnt sure i sent it properly

[Spongebob]

Thank you all,
We feel a lot calmer this morning after reading the latest posts, the way our business is set up we need to trade from the same premises,
we have a showroom trhat has been specially adapted,it needs to be to display what we sell, it cost a considerable amount to do and the business has traded there, for 12 years, thankfully we have managed to keep up to date with the rent, our landlord takes no prisoners and the first time we were late paying we had a solicitors letter 2 days later.

Spongebob do you think we can trade with the new company from the same premises, what could the consequences be?


The main problem with remaining in your current premises is that once HMRC (or any other creditor) starts persuing their debt in earnest you are vulnerable to a visit from one of their collection officers or from a bailiff once a court judgement has been made against OldCo. You will need to be able to prove or at least demonstrate that the contents of the premises are not the property of OldCo; otherwise you could well find them seized.

The good news is that you don't need to worry about fixtures and fittings, or any work that you have done to adapt the premises to make them suitable for selling your products. Any tenants' improvements and anything fitted to a wall or the floor automatically become the property of the landlord as they now comprise part of the fabric of the building. So they are safe.

Stock and other assets of course, are another matter.

You don't tell us what line of business you are in but if you turn over your stock fairly quickly you shouldn't have a problem. The time taken for HMRC to take court action against OldCo, get judgement, and then to send in the bailiffs will be measured in months rather than days. This should give you time to sell all stock purchased by OldCo and replace it with new stock for which you have a valid invoice made out to NewCo.

If you have a good working relationship with your suppliers it may be possible to arrange for them to issue credit notes to OldCo and to re-invoice NewCo for certain items. This effectively transfers ownership and safeguards the merchandise from the hands of the bailiff. While these tactics may not satisfy the eventual scrutiny of the Official Receiver, they serve their purpose in the short term by rendering the bailiff impotant and enabling you to develop the business of NewCo. The OR can be sorted out (much) later.

The more complex solution relies on your relationship with your landlord.

Commercial landlords have almost fuedal rights over their tenants dating back to medieval times. These can be used to your advantage but be warned; you are placing a lot of trust in your landlord to do as agreed.

If OldCo falls behind with its rent then the landlord has every right to send in his bailiffs and seize the assets of OldCo without having a court order. This peculiarity of English law means that the landlord comes right at the top of the pecking order of creditors. Once the landlord has taken possession of the assets then they are safe from seizure by anyone else, including HMRC.

Of course the landlord doesn't want OldCo's assets - he wants the back rent paying and he wants a good tenant in his premises paying him regularly going forward. So NewCo 'buys' the assets of OldCo from the landlord and starts trading as if nothing had happened.

This is a much simplified account of a tactic which although little known, has been used regularly and successfully for decades, if not centuries. I would urge anyone contemplating following it to take legal advice from a good commercial solicitor first though, as there are procedures which must be followed to the letter if it is going to stand up in court. In essence though, it works as above.

I'll call you later, Mike.

Cheers
Bob