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Ltd company struck off by Companies House

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Rach2500

A company I deal with have recently discovered that they have been struck of the register by Companies House because they have repeatedly failed to file accounts or to complete their annual returns (had a succession of really bad accountants). The company has a few assets and not a huge amount of debt and the director (owner) is happy to continue trading as a sole trader, but the debts that do exist are to HMRC for around £4k in unpaid tax/nic (business has been struggling). How will the owner be effected now that they have been struck off? They have had the bank account frozen and are in negotiations with the bank to open a sole trader account (the bank account has a small credit balance), but will HMRC be able to pursue their debt? And also, is it true that her assets will become the property of the crown? (read that somewhere).
Sorry to be long winded - advice would be greatly appreciated!
Rachael
 
Have a read of my blog post - explains this all

Amazingly a change in policy by Companies House means that if your company is compulsorily closed by them you could avoid paying any corporation tax that you owe.

http://www.cheapaccounting.co.uk/blog/?p=791
 
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How you can legally get away with not paying corporation tax !

image1.png

Amazingly a change in policy by Companies House means that if your company is compulsorily closed by them you could avoid paying any corporation tax that you owe.
How can this happen?
It seems that Companies House have adopted a new approach of closing a limited company (by a process known as striking off) if they do not complete an Annual Return.
Just to clarify…
An annual return is a snapshot of certain company information at the made-up date e.g. address of registered office, details of directors etc.
It is different to the company accounts and it does not contain any financial data about the company’s performance.
There are no fines for filing the annual return late unlike if you file your accounts late where fines start at £150 and rise to £1500 for private companies.
So why have they taken this approach?
I telephoned the Companies House help line and was told:
“We changed this in about August 2009. If companies do not reply to our letters then we begin the strike off after about 2 to 3 months. The change was as a result of a policy decision and not as a result in a change in law or anything like that.”
What does this mean?
As a result of the action by Companies House to close the company, technically the company no longer exists.
And a company that no longer exists cannot pay corporation tax!
As this action was taken by Companies House then the directors or shareholders have not avoided their duties to inform creditors.
So let’s just say that you have a company that has traded, made a profit but for whatever reason the company has been compulsorily closed down by Companies House then you could just start another one and do the same again!
What is going wrong?
It seems that, whilst HMRC are told of these compulsory closures, they are not doing anything about them.
They could easily stop the close down until they have the final accounts and tax paid by the limited company.
Why don’t they do this?
That is the question I would love to have the answer to?
Should HMRC do something?
Well in my opinion yes – at the moment HMRC are avoiding collecting taxes!
Mind you – should we be surprised about another HMRC fiasco?
Footnote
Whist I may not agree with the ethics behind this approach, it is legal and done with full knowledge of Companies House and HMRC. So who am I to question it?
Caution – if the company is closed the business bank account will be closed and the money belongs to the Crown as will any other company assets.
There may also be other reasons for not wishing your company to be closed down. However I am sure that there will be a few who will enjoy making use of this loop hole.
Click to expand...



Fascinating stuff...


It always used to be the case that HMRC would object to Companies House striking off a company if money was owed to them. It seems that they are no longer doing so.



As Elaine suggests, this provides a short-cut to winding up an insolvent company at no cost. It would also appear to offer a way avoid any awkward questions from the Official Receiver!


So if your company is in trouble, simply move all assets to a place of safe keeping and let Companies House strike the company off. No-one is then going to ask you what happened to the assets! All debts disappear.


This is so open to abuse it is unreal. It can't last - my advice would be to fill your boots while you can...
 
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I'm just chuckling to myself now thinking about what this means for Insolvency Practitioners! Why on earth would anyone pay an IP to liquidate their company when Companies House will just make everything go away?

:)
 
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Anybody considering acting on this comment: "So if your company is in trouble, simply move all assets to a place of safe keeping and let Companies House strike the company off. No-one is then going to ask you what happened to the assets! All debts disappear." should be very careful. It would undoubtedly amount to theft and probably fraud and if HMRC got wind of it they would act pretty quickly.

Any company which ceases trading and still has liabilities of any size is likely to find itself the subject of a winding up petition or other legal action before too long. Many people check the status of a company before they sue it and there is an objection/appeal process to Companies House if striking off has been proposed but not finalised. The process takes several months. A company which has been struck off can also be restored to the register and put into liquidation, with all the consequences that entails.

Of course in very small cases there is no point in incurring the cost of having a formal liquidation and directors can have their company struck off voluntarily but bear in mind that all the assets must have been properly accounted for otherwise the HMRC could pursue the directors personally for tax on benefits or assets received from it.

If the liabilities of a company are more than minimal, it is very dangerous simply to leave it in the hope it will be struck off. This could lead to compulsory liquidation and some fairly unpleasant consequences for the directors/former directors.
 
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You are of course completely correct in your technical points. I refer you however, to the pertinent point in Elaine's piece;

It seems that, whilst HMRC are told of these compulsory closures, they are not doing anything about them.
They could easily stop the close down until they have the final accounts and tax paid by the limited company.
Why don't they do this?
That is the question I would love to have the answer to?
Click to expand...
It would appear that, for some reason, HMRC are no longer routinely objecting to a company strike off when they are owed money. If they make no objection then the company will be struck off without any compulsory liquidation taking place; in other words no-one is ever going ask any awkward questions or ask to see the books.

It has got to be worth a try - there is nothing to lose and an awful lot potentially to be gained!

Moving the company assets to a place of safe keeping breaks no law. Indeed it could be argued that in protecting them from seizure by any one creditor one is acting in the interests of the other creditors by ensuring they are all treated equally.

If the strike-off tactic doesn't work then you just invite the creditors to initiate winding up proceedings, resulting eventually in compulsory liquidation. Meanwhile, the assets are still safe. If the Official Receiver asks about them, produce them. My experience is that the OR is easily fobbed off with the explanation that the assets were sold for cash in order to pay the directors' unpaid salaries!

;)
 
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Alan R Price said:
Anybody considering acting on this comment: "So if your company is in trouble, simply move all assets to a place of safe keeping and let Companies House strike the company off. No-one is then going to ask you what happened to the assets! All debts disappear." should be very careful. It would undoubtedly amount to theft and probably fraud and if HMRC got wind of it they would act pretty quickly.
Click to expand...

I reiterate.

Moving company assets to a place of safe keeping is NOT theft! It is simply moving them from the company's place of business to a separate storage facility. A crime is only committed when it can be proved that you intended permanently to deprive the rightful owner of said assets of their goods.

My point is that if anyone in authority asks about them - you tell them. If the company is struck off however, the chances are that no-one will ever ask!
 
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No disrespect, Spongebob, but if a company is struck off, its assets become "bona vacantia" and ownership automatically passes to the Crown; any person disposing of them would be disposing of Crown property. It's not a risk I would want to take. OK, the risk of prosecution if the assets are of little value is small but legally (and some would say morally) it is quite wrong.
 
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I know this threads a fair few months old but isn't it illegal not to file a annual return??? Hence if you didn't file your annual return in the hope your ltd company might get struck off, you would infact get fined by companies house...

this is what is on companies house website: "Failure to file accounts or annual returns is a criminal offence which can result in directors being fined personally in the criminal courts"

worldwideweb.companieshouse.gov.uk/about/gbhtml/gp5.shtml#

Ta,

Douglas
 
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Mr Douglas said:
I know this threads a fair few months old but isn't it illegal not to file a annual return??? Hence if you didn't file your annual return in the hope your ltd company might get struck off, you would infact get fined by companies house...

this is what is on companies house website: "Failure to file accounts or annual returns is a criminal offence which can result in directors being fined personally in the criminal courts"

worldwideweb.companieshouse.gov.uk/about/gbhtml/gp5.shtml#

Ta,

Douglas
Click to expand...

Yes, you are right Douglas. Companies Act 2006 states:

858Failure to deliver annual return

(1)If a company fails to deliver an annual return before the end of the period of 28 days after a return date, an offence is committed by—

(a)the company,

(b)subject to subsection (4)—

(i)every director of the company, and

(ii)in the case of a private company with a secretary or a public company, every secretary of the company, and

(c)every other officer of the company who is in default.
 
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keithdean@deanco said:
Yes, you are right Douglas. Companies Act 2006 states:

858Failure to deliver annual return

(1)If a company fails to deliver an annual return before the end of the period of 28 days after a return date, an offence is committed by—

(a)the company,

(b)subject to subsection (4)—

(i)every director of the company, and

(ii)in the case of a private company with a secretary or a public company, every secretary of the company, and

(c)every other officer of the company who is in default.
Click to expand...

and how often have Co House enforced this?

Anyone here seen it done?

How many times?

As comments on the article that I posted - some parts of the Companies Act are a joke!
 
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elainec100@cheapaccounting said:
and how often have Co House enforced this?

Anyone here seen it done?

How many times?

As comments on the article that I posted - some parts of the Companies Act are a joke!
Click to expand...

Companies House won't normally bring criminal proceedings of their own volition, although there was a time when it was more common - but there were far fewer companies then.

It seems to me that the only time that they threaten criminal proceedings (for ordinary companies) is if somebody makes a complaint that the accounts or returns haven't been filed and what are they (Co House) doing about it?

It can be quite useful in fact. I have known cases where Co House threaten the director with criminal charges, but the accountant won't release the accounts because of unpaid bills. All of a sudden the director seems willing to pay the bills personally, something that he'd refused to do before, but the impending criminal proceedings seemed to concentrate his mind. Never did find out who'd lodged the complaint, of course. ;)
 
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elainec100@cheapaccounting said:
Have a read of this ....

Struck-off companies dodge £16bn a year



http://www.accountingweb.co.uk/topic/tax/struck-companies-dodge-16bn-year/486630
Click to expand...


In a 68-page report published this weekend, Murphy found that in the year to March 2010 more than 500,000 firms were dissolved after failing to file accounts with Companies House.

"Rather than chase or prosecute them Companies House simply gets rid of the offending companies - so sweeping the problem of non-compliance with the law out of view," the report concluded.

The agency's reluctance to pursue non-compliant firms, combined with HMRC's failure to collect tax from a majority of registered companies means that up to £16bn in tax goes uncollected every year, Murphy estimated.

Analysis of the Companies House register found that a majority of the 500,000+ companies dissolved during the year to March 2010 were removed from the Register of Companies because they did not file documents required by law. Roughly a third of all companies dissolved were less than two years old and had never filed accounts.Evidence from the study suggested HMRC's stance with non-compliant companies was equally lax. According to Murphy, HMRC does not appear to demand information from companies struck off if they are less than two years old. "In many cases we know almost nothing at all about those companies that disappeared forever," the study stated.
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So all you have to do is set up a new company every couple of years, allowing the old one to get struck off and disappear along with all its debts to HMRC...

You need never pay tax again!

As Elaine says, the system is absolute madness but is there to be taken advantage of...
 
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Can i ask then?, if a company hasnt made any money (in fact made a loss) doesnt owe any money, has no money in the bank to pay accountants for the year end,has no future likeyhood of making any money, had only the director as employee and no tax/ni due can closing the company down be done like this?.
 
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Yes, but there is probably little to gain and if Companies House decide in the future to take it further you could end up with fines.
 
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midgetman said:
Can i ask then?, if a company hasnt made any money (in fact made a loss) doesnt owe any money, has no money in the bank to pay accountants for the year end,has no future likeyhood of making any money, had only the director as employee and no tax/ni due can closing the company down be done like this?.
Click to expand...

Have a good read of the posts above - seems that the route suggested would fit in your circs ;)
 
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elainec100@cheapaccounting said:
:|:|:| confused - why?
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Sorry, I was referring to the previous post as follows:

midgetman said:
Can i ask then?, if a company hasnt made any money (in fact made a loss) doesnt owe any money, has no money in the bank to pay accountants for the year end,has no future likeyhood of making any money, had only the director as employee and no tax/ni due can closing the company down be done like this?.
Click to expand...
 
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midgetman said:
Can i ask then?, if a company hasnt made any money (in fact made a loss) doesnt owe any money, has no money in the bank to pay accountants for the year end,has no future likeyhood of making any money, had only the director as employee and no tax/ni due can closing the company down be done like this?.
Click to expand...

keithdean@deanco said:
Yes, but there is probably little to gain and if Companies House decide in the future to take it further you could end up with fines.
Click to expand...

keithdean@deanco said:
Sorry, I was referring to the previous post as follows:
Click to expand...

But I still don't get it - the company has made a loss, won't be profitable and will be closed (I think that was what was being said?).



So why don't allow strike off for none filing of AR rather than pay to file final accounts, CT600s and then £10 to strike off?

What is to be agined by not following that approach?



There is little risk of Co House pursuing none filing of AR?
 
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Perhaps i should expand a bit further?, last 2 yrs accounts been done and any CT due has been paid, only myself as director/secretary Paye year end done (not that I paid myself much), how ever due to a heart attack early this year i have been unable to devote the time nor energy needed to carry on.
Company has no assets only debtor? is Bt for broadband/telephone and the next bill isnt due until June.
Next accounts are due end of april along with returns, however, there is literally not a penny in the bank, no prospect of any being paid in.

I dont have the funds to pay for accounts to be done, and to be honest have lost all heart to even try to get the company going again (more concerned with health).

The whole sitution has, to honest stressed me out even more which is not helping my recovery very much, also the wife is now getting worried about how i should proceed.

any advice?
 
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elainec100@cheapaccounting said:
But I still don't get it - the company has made a loss, won't be profitable and will be closed (I think that was what was being said?).

So why don't allow strike off for none filing of AR rather than pay to file final accounts, CT600s and then £10 to strike off?

What is to be agined by not following that approach?

There is little risk of Co House pursuing none filing of AR?
Click to expand...

If the company owes no tax then for me it is not worth the risk of being prosecuted in a criminal court for failure to deliver AR even if it is just a fine. Although, CH appear to be taking no action on this there is no guarantee for the future.

If it costs just a few hundred pound for winding up according to the book then I would, personally, rather do this. If the company owes £1000's in CT etc. then maybe it is worth it.
 
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Even a few hindered pounds is a lot to someone where there is just no money.
I guess it is up to the poster to assess the (low) risk of Co House pursuing him (as opposed to the many thousands of others that they have not) compared to finding the money to pay to get accounts done & strike off.
 
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I think midgetman should just apply to Companies House for the company to be struck off. It costs very little and the Registrar of Companies is simply not going to be interested in prosecuting somebody with a spotless record whose only crime was to have a heart attack. The company has no significant liabilities and there appears to be no culpability on migdetman's behalf. Let's get real, people.

And by the way, it costs a lot more than "a few hundred pounds" to wind up a company. It's a minimum of £2,000 plus VAT to present a winding-up petition nowadays.
 
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Alan R Price said:
And by the way, it costs a lot more than "a few hundred pounds" to wind up a company. It's a minimum of £2,000 plus VAT to present a winding-up petition nowadays.
Click to expand...

To strike off is £10.

I think the terms strike off and wind up may have been used incorrectly interchangeable :)
 
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Spongebob said:
So all you have to do is set up a new company every couple of years, allowing the old one to get struck off and disappear along with all its debts to HMRC...

You need never pay tax again!

As Elaine says, the system is absolute madness but is there to be taken advantage of...
Click to expand...

It is open to any creditor to object, but they rarely do.

HMRC used to object but as the recent report suggests even they don't bother now.
 
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Now don't shout at me - I am just the messenger here...

If you had an accountant and you did this with underpaid tax then the ICAEW advise that you have to report the client under the POCA.

I am just telling you what I was told by the technical department when I looked at this.

I can provide the contact details if you want to argue this point with them.

HOWEVER

I would never suggest doing this but ...

You could in theory set up a limited company

Trade for 12 months plus until AR overdue and get notice to strike off

Get money out of bank account - because this is frozen on strike off

Allow Co House to strike off

No accountant involved

Then set up new company and do the same


SEEMS A MASSIVE LOOP HOLE (EASILY CLOSED) IN THE TAX SYSTEM TO ME.

One to plug if they are serious about stopping tax evasion maybe - or did I miss something?

Obviously the majority of honest business people would never dream of exploiting this loop hole - would they :eek::);)
 
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elainec100@cheapaccounting said:
Now don’t shout at me – I am just the messenger here...

If you had an accountant and you did this with underpaid tax then the ICAEW advise that you have to report the client under the POCA.

I am just telling you what I was told by the technical department when I looked at this.

I can provide the contact details if you want to argue this point with them.

HOWEVER

I would never suggest doing this but ...

You could in theory set up a limited company

Trade for 12 months plus until AR overdue and get notice to strike off

Get money out of bank account – because this is frozen on strike off

Allow Co House to strike off

No accountant involved

Then set up new company and do the same


SEEMS A MASSIVE LOOP HOLE (EASILY CLOSED) IN THE TAX SYSTEM TO ME.

One to plug if they are serious about stopping tax evasion maybe – or did I miss something?

Obviously the majority of honest business people would never dream of exploiting this loop hole – would they :eek::);)
Click to expand...

It would probably be considered fraud if planned, Elaine - still, you knew that and I can see your tongue firmly planted in your cheek!
 
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Alan R Price said:
It would probably be considered fraud if planned, Elaine - still, you knew that and I can see your tongue firmly planted in your cheek!
Click to expand...


Oh yes - but that is what tax evasion is - fraud

:eek::eek::p:p

Often the schemes are so much more involved / complex than this though.


Even a complete idiot could work this fraud
 
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elainec100@cheapaccounting said:
Now don’t shout at me – I am just the messenger here...

If you had an accountant and you did this with underpaid tax then the ICAEW advise that you have to report the client under the POCA.

I am just telling you what I was told by the technical department when I looked at this.

I can provide the contact details if you want to argue this point with them.

HOWEVER

I would never suggest doing this but ...

You could in theory set up a limited company

Trade for 12 months plus until AR overdue and get notice to strike off

Get money out of bank account – because this is frozen on strike off

Allow Co House to strike off

No accountant involved

Then set up new company and do the same


SEEMS A MASSIVE LOOP HOLE (EASILY CLOSED) IN THE TAX SYSTEM TO ME.

One to plug if they are serious about stopping tax evasion maybe – or did I miss something?

Obviously the majority of honest business people would never dream of exploiting this loop hole – would they :eek::);)
Click to expand...

Tax office will pass your details to DCA, then bailiffs etc. Can`t just hide away, they will get you to court and you will have to tell them why you haven`t submitted papers etc.
 
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RobCCTV said:
Tax office will pass your details to DCA, then bailiffs etc. Can`t just hide away, they will get you to court and you will have to tell them why you haven`t submitted papers etc.
Click to expand...

:|:|:|:|

Did you read the post regarding HMRC not collecting the taxes?
 
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RobCCTV said:
Tax office will pass your details to DCA, then bailiffs etc. Can`t just hide away, they will get you to court and you will have to tell them why you haven`t submitted papers etc.
Click to expand...

That's the whole point of the article Elaine linked to, Rob. HMRC appear as a matter of policy not to be investigating cases of companies being struck off by Companies House for non submission of AR within two years of inception.

I imagine that the reasons for this are financial. If hundreds of thousands of companies a year are being struck off automatically like this it would involve a huge deployment of manpower to follow up every case, for little or no return in most instances. Cheaper in the long run to allow the odd tax debt to slip through rather than incur the expense of policing the system properly...

... of course what inevitably happens in situations like this is that word gets out that there is a loophole to be exploited and the 'odd case' becomes a flood. Only then will the loophole be closed.
 
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RobCCTV said:
Yes I did, but it doesn`t mean they will not chase you after 5 years like they do now for unpaid NI, taxes etc. Trust me, they will not let you off so easy. This "loophole" might be just temporary.
Click to expand...

The debt is with the company not the person - it dies with the company :rolleyes:
 
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elainec100@cheapaccounting said:
The debt is with the company not the person - it dies with the company :rolleyes:
Click to expand...

Hmm, but it doesn`t sounds right then. If I`m single owner of my own limited company, then there must be some kind of responsibility on me regarding companies duties against tax office. Company is just legal fiction, it doesn`t exist and cannot file yearly reports, so owner must do that :|
 
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RobCCTV said:
Hmm, but it doesn`t sounds right then.
Click to expand...

That is why it is a loop hole.

A company is not fiction - it is a legal entity.

I am not sure that I will convince you differently from your current views- so I shall leave you to reach your own conclusions. Good luck
 
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RobCCTV said:
Yes I did, but it doesn`t mean they will not chase you after 5 years like they do now for unpaid NI, taxes etc. Trust me, they will not let you off so easy. This "loophole" might be just temporary.
Click to expand...

I agree, this is a similar loophole to the pre 2006 credit card agreements fiasco. All credit card agreements issued before 2006 which did not have the prescribed terms under the Consumer Credit Act 1974 were deemed unenforceable in court.

However, the banks are still chasing 1000's credit card debts more than 5 years after the last agreement was issued.
 
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RobCCTV said:
Hmm, but it doesn`t sounds right then. If I`m single owner of my own limited company, then there must be some kind of responsibility on me regarding companies duties against tax office. Company is just legal fiction, it doesn`t exist and cannot file yearly reports, so owner must do that :|
Click to expand...

You need to read up on your company law, Rob.

The whole point of limited companies and the reason they have existed for 300 years is to afford directors and shareholders protection from personal liability for the debts of the company. Once a limited company is struck off it ceases to exist - therefore its debts also cease to exist!

No-one - not even HMRC - can come after the director of a dead company chasing money that may be owed. That's why this loophole is so obviously open to abuse.

Until the loophole is closed however, it remains.
 
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