Company Winding Up Petition Received From High Court - Help Needed

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David198

  • #1
    Hi All,
    Today I received company winding up petition from High Court. The petition is filed by HMRC. I owe them about £40k.

    Well to cut the story shirt, I owed HMRC Corporation Tax and have been paying them monthly before recession kicked in. During recession I was out of work and hence couldn't pay CT. For past 2 years I'm back in business and have been doing ok if not great.

    Few months back I received notices from HMRC for which I replied to agree for a monthly payment option which, obviously, was refused and hence company winding up petition.

    I'm IT consultant and I've been in good business with 2 long term fixed contracts and few more to top it up. I could easily afford £1-2k monthly payment if HMRC has agreed.

    I've no option for getting loan or borrowing from anyone whatsoever. This option is completely ruled out.

    For the payment I've only one option to get HMRC agree for a monthly payment.

    Since company is doing good I don't see any reason why it should be wounded up.

    I'm still in Googling mode to find out options CVA/Administration etc etc. so assume that I'm newbie to these things. I've read some of the related thread on this forum and other forums as well.

    Company details:
    =============
    1 man company
    no assets, if you ignore laptop ;)
    no other creditors
    rest of everything is clean
    VAT is filed regularly
    company returns are regular
    All of my business is done online

    Basically I can do business without a company if this is the last resort.

    1) With above details I would appreciate if anyone can help me out in how to proceed to get HMRC agree for monthly payment if it is possible?

    2) I read somewhere that within 7-10 days of petition they will freeze my company's bank account? Is it true? Anyway to let it not happen

    3) What are my other options? CVA/Administration etc etc.. ?

    4) How much I'll be affected personally?

    Tx in advance to all those good souls who will spend their precious time in replying to this thread.
     
    M

    MartBrooks

  • #4
    David198 said:
    Well to cut the story shirt, I owed HMRC Corporation Tax and have been paying them monthly before recession kicked in. During recession I was out of work and hence couldn't pay CT. For past 2 years I'm back in business and have been doing ok if not great.
    Click to expand...

    Apologies if I'm being stupid but I don't quite understand.

    As I understand it, corporation tax is calculated on the profit a company makes over the course of a tax year. So you've made X amount of profit and now you need to give a slice to HMRC. You must have had the money otherwise you couldn't have registered a profit so, err, where did it go?
     
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    Geoff T

    Geoff T

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  • #5
    MartBrooks said:
    Apologies if I'm being stupid but I don't quite understand.

    As I understand it, corporation tax is calculated on the profit a company makes over the course of a tax year. So you've made X amount of profit and now you need to give a slice to HMRC. You must have had the money otherwise you couldn't have registered a profit so, err, where did it go?
    Click to expand...

    Same place it went for a lot of SME's Martin...

    Accountants telling the business owners what they'd owe in CT about 6 weeks before the bill was due (which was more than they thought it would be)... back then things were ok so the payment plan (pre recession) was affordable, so everyone was fine....

    Recession hit, contracts were cancelled/not kept on... income dropped (but bills went up), so the plans went - literally - out the window... (lots of SME's get by one day at a time), couple that with the Govt - HMRC in particular - not playing nice any more...

    End result... OP's post (and many more like them I'm sure...)


    ps - same applies everywhere... 2 years ago I was "comfortable"...2 year on I'd classify myself as "careful"... BIG difference in those two definitions!
     
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    David198

  • #6
    Hi Martin,
    Long story again, cut it short I pocketed all money from the company via dividend. I know I should not have done but it was not me who brought recession. Have to take care of personal life as well. any way deed has been done and can't be undone, have to get things sorted out now.
     
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    David198

  • #7
    Geoff T said:
    Same place it went for a lot of SME's Martin...

    Accountants telling the business owners what they'd owe in CT about 6 weeks before the bill was due (which was more than they thought it would be)... back then things were ok so the payment plan (pre recession) was affordable, so everyone was fine....

    Recession hit, contracts were cancelled/not kept on... income dropped (but bills went up), so the plans went - literally - out the window... (lots of SME's get by one day at a time), couple that with the Govt - HMRC in particular - not playing nice any more...

    End result... OP's post (and many more like them I'm sure...)
    Click to expand...

    So truly said.
     
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    Geoff T

    Geoff T

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  • #11
    Geoff T said:
    true - but lots did it...

    "Grass doesn't stop being green does it"?
    Click to expand...

    Rather than be coy about it - here's what I want to see...

    I know people got themselves in trouble - like the OP - thinking things would always be good, credit would always be easy, the grass would always be green... but it's not they're fault (wholly) they are where they have ended up - proper fiscal planning was sorely lacking in the past...

    BUT - we all (inc HMRC) have a choice now... Biz is better - OP is an example of that... if realistic payment plans could be renegotiated NOW it will save a big increase in insolvencies/bankruptcies for the next 12-24 months, and keep a lot of people off benefits (that we can't afford as a society)...

    Fingers crossed the sensible decision is made..
     
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    internetspaceships

    internetspaceships

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  • #13
    Geoff T said:
    Same place it went for a lot of SME's Martin...

    Accountants telling the business owners what they'd owe in CT about 6 weeks before the bill was due (which was more than they thought it would be)... back then things were ok so the payment plan (pre recession) was affordable, so everyone was fine....

    Recession hit, contracts were cancelled/not kept on... income dropped (but bills went up), so the plans went - literally - out the window... (lots of SME's get by one day at a time), couple that with the Govt - HMRC in particular - not playing nice any more...

    End result... OP's post (and many more like them I'm sure...)


    ps - same applies everywhere... 2 years ago I was "comfortable"...2 year on I'd classify myself as "careful"... BIG difference in those two definitions!
    Click to expand...

    The moral of the story in Geoff's post is get an accountant who does your LTD company books within 6 weeks or 2 months of the financial year end.

    Also keeping an eye on what your company is ACTUALLY making over the year should give a rough guestimate of the likely CT.

    Sheesh, Directors should be in control of their companies.
     
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    David198

  • #15
    internetspaceships said:
    The moral of the story in Geoff's post is get an accountant who does your LTD company books within 6 weeks or 2 months of the financial year end.

    Also keeping an eye on what your company is ACTUALLY making over the year should give a rough guestimate of the likely CT.
    Click to expand...
    Yes already learned lessons and have started to learn spreadsheet ;) but only if I survive from Winding Up Petition.
     
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    Geoff T

    Geoff T

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  • #16
    David198 said:
    Yes already learned lessons and have started to learn spreadsheet ;) but only if I survive from Winding Up Petition.
    Click to expand...

    David - s/sheet won't do it for you, unless you have the right one!:eek:

    Consider that fair pre-warning!;)

    As far as the current "nuts and bolts" thing goes - if you get worried (and Alan can't respond due to commitments etc), PM me something and I'll give it a freebie eye if you want... I might be able to steer you on the right course if nowt else...
     
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    David198

  • #17
    Geoff T said:
    David - s/sheet won't do it for you, unless you have the right one!:eek:

    Consider that fair pre-warning!;)
    Click to expand...
    I do have an Accountant who keeps an eye on me.

    Geoff T said:
    As far as the current "nuts and bolts" thing goes - if you get worried (and Alan can't respond due to commitments etc), PM me something and I'll give it a freebie eye if you want... I might be able to steer you on the right course if nowt else...
    Click to expand...
    Tx a lot. I still have to go through this night before sun shines next day.

    Mind sharing in public if it is not too private. It might help other people as well. This was the same very reason why I had to start this thread as I couldn't find much details on Goog-ling. All I could find concluded that I'm in deep sh*t and I shall contact those who know the nuts and bolts of it.

    I'm not asking to reveal all your hard earned knowledge but some pointer would help.

    If I've understood correctly, and considering my situation I'm left with followings

    1) I've no option to borrow from public institutions, they wouldn't lend me, I've already tried. So until n unless there is any good soul who could give me a hand in securing this £40k, I'm done with borrowing.

    2) Company Voluntary Arrangement is also ruled out as I understand it might cost me over £5k.

    3) The last (?) and probably the relief which I'm looking for is to get court to agree for payment plan.
    Which means that I've to defend petition, prove that business is viable, get company into Administration. Administration will stop (stay) Winding Up Petition. Administrator may propose a Company Voluntary Arrangement (CVA) which might give me some life to repay the money in 1-n years.

    4) Any other options?
     
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    Geoff T

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  • #19
    David198 said:
    I do have an Accountant who keeps an eye on me.


    Tx a lot. I still have to go through this night before sun shines next day.

    Mind sharing in public if it is not too private. It might help other people as well. This was the same very reason why I had to start this thread as I couldn't find much details on Goog-ling. All I could find concluded that I'm in deep sh*t and I shall contact those who know the nuts and bolts of it.

    I'm not asking to reveal all your hard earned knowledge but some pointer would help.

    If I've understood correctly, and considering my situation I'm left with followings

    1) I've no option to borrow from public institutions, they wouldn't lend me, I've already tried. So until n unless there is any good soul who could give me a hand in securing this £40k, I'm done with borrowing.

    2) Company Voluntary Arrangement is also ruled out as I understand it might cost me over £5k.

    3) The last (?) and probably the relief which I'm looking for is to get court to agree for payment plan.
    Which means that I've to defend petition, prove that business is viable, get company into Administration. Administration will stop (stay) Winding Up Petition. Administrator may propose a Company Voluntary Arrangement (CVA) which might give me some life to repay the money in 1-n years.

    4) Any other options?
    Click to expand...

    thanks for the reply David -

    1st - let me explain my thanks... you've shown to me in this thread that you really want some answers, and you're willingness to say it "out loud and honestly" to help others is - IMO - commendable.

    2nd - one thing you can count on my friend - daylight ALWAYS follows night;) you'll get there, just hang on in...

    Atilla said:
    I'm sure there was a thread on here recently where HMRC were doing their usual - winding up process. Because victim was paying off debt and happy to do so, the Court usually holds off the the winding up.
    Click to expand...


    Atilla is right here - although HMRC ARE getting rough, the court is trying to "rein it in a bit"... this always happens, one side needs to bear it's teeth, the other side picks up the "big society" slack that ensues...

    The court gets tough - HMRC etc backs off, vice versa, but the budget is starting to bite now...

    Go to court, and show willingness to pay within your means, and I doubt a judge will find against you... (NB - "doubt" does not mean "guarantee")
     
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    David198

  • #20
    Geoff T said:
    thanks for the reply David -

    1st - let me explain my thanks... you've shown to me in this thread that you really want some answers, and you're willingness to say it "out loud and honestly" to help others is - IMO - commendable.

    2nd - one thing you can count on my friend - daylight ALWAYS follows night;) you'll get there, just hang on in...




    Atilla is right here - although HMRC ARE getting rough, the court is trying to "rein it in a bit"... this always happens, one side needs to bear it's teeth, the other side picks up the "big society" slack that ensues...

    The court gets tough - HMRC etc backs off, vice versa, but the budget is starting to bite now...

    Go to court, and show willingness to pay within your means, and I doubt a judge will find against you... (NB - "doubt" does not mean "guarantee")
    Click to expand...
    Tx Geoff for understanding me :)

    Meanwhile as Atilla et al mentioned I discovered legendary Spongebob and stumble upon this thread -

    http://www.ukbusinessforums.co.uk/forums/showthread.php?t=89458

    where he advised other poor souls like me. I'm still digging down further, but what I came to know from that thread (as per Spongebob) is that just let it happen, disappear and reboot your life ;)

    I haven't read all of Spongebob's threads and posts so can't say for sure what need to be done.

    However I'm not in favour or running away and disappearing.

    I agree and have been planning this all the time since HMRC started to knock my doors (they literally did, I went silent ;) ) to defend myself with the fact that there is a cash flow and there will be cash flow to pay the debt in due course of time and that the winding up stuff is not going to help anyone. I also agree with you that any judge, provided he didn't had a bad night ;), will understand my situation.

    Now it has been all a theory. Let's assume that I've to go down to defend myself, how to proceed with this? They are going to advertise in the London Gazette which will get my bank account frozen which means I'm out of business.

    Any way to keep Bank account operating while defend procedure starts?

    Any recommendation for a Solicitor who could help out?
     
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    Geoff T

    Geoff T

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  • #21
    David198 said:
    However I'm not in favour or running away and disappearing.
    Click to expand...

    IMHO the best - and most commendable - thing said in a long time...

    David198 said:
    I agree and have been planning this all the time since HMRC started to knock my doors (they literally did, I went silent ;) ) to defend myself with the fact that there is a cash flow and there will be cash flow to pay the debt in due course of time and that the winding up stuff is not going to help anyone. I also agree with you that any judge, provided he didn't had a bad night ;), will understand my situation.

    Now it has been all a theory. Let's assume that I've to go down to defend myself, how to proceed with this? They are going to advertise in the London Gazette which will get my bank account frozen which means I'm out of business.

    Any way to keep Bank account operating while defend procedure starts?

    Any recommendation for a Solicitor who could help out?
    Click to expand...

    I know some people, no promises, but will be happy to ask them if they can help - but would need £ info that I would NOT want on an open forum;)
     
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    David198

  • #22
    Geoff T said:
    IMHO the best - and most commendable - thing said in a long time...



    I know some people, no promises, but will be happy to ask them if they can help - but would need £ info that I would NOT want on an open forum;)
    Click to expand...

    Can afford £ as long as it is £ and not ££ or £££. Mind dropping me tips via private message if don't want to go public.

    Enough for the night, have to take some rest now. I hope it's going to be sunny tomorrow.
     
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    David198

  • #23
    I have been thinking and a lot of thinking. Finally decided to give up and go hiding. Defending against petition is not viable for me as I don't have that sort of fund available with me. With every action I take in defending it is going to cost me £££ thus sinking me deeper in debt.

    I'll go for now Spongebob's suggested route.
     
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    Spongebob

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  • #24
    Hi David,

    Sorry I'm a bit late to the party - thank you for your PM pointing me this way.

    Your situation is typical of many one-man bands who have been encouraged by accountants over the last ten years or so to operate as limited companies and reduce their personal tax liabilities by paying themselves dividends rather than salary. This is all fine and dandy - indeed I work this way myself - until business takes a nosedive and 'dividends' continue to be taken even though there are now no profits to support them. In effect, you have been living off the Corporation Tax money that was due to HMRC.

    While ultimately control of a company's finances is the responsibility of the director, it is my belief that accountants share a good deal of the responsibility for pushing their clients down the incorporation and dividends route without explaining fully the potential repercussions.

    If you have been paying yourself 'dividends' while the company has not been making the necessary profits, technically the company has been acting illegally. Dividends can only be paid out of profits.

    What you are left with is a huge directors loan account - you owe the company all the excess dividends that have been paid to you while the company has not been making sufficient profits.

    The simple solution is to restate all these dividends in your accounts as salary and account for the appropriate PAYE and NI. Your accountant is able to do this. I asked my accountant recently about the feasibility of such 'restatement' while giving advice to another forum member and he told me that such work is simple and routine. I would hope that your accountant is as obliging as mine is...

    As things stand, should the company be wound up it will be passed to the Official Receiver to be liquidated. You may be lucky and they may just let the 'illegal' dividends pass. It is more likely however, that they will attempt to reclaim them from yourself. If these payments appear in the records as salary you will not have to repay a penny. If you account for the PAYE & NI you do not owe any personal tax either, even though the company will not have paid it to HMRC.

    If your accountant is not amenable then I would simply redo the company's accounts myself for the last couple of years and present them to the OR in a not too orderly fashion. They will be disinclined to trawl through shoe boxes full of random invoices - they simply do not have the time or man-power.

    Ultimately, there is no reason for the OR to challenge your assertion that the company has been paying you in salary. All he can see are bank statements showing payments from one account to another.

    As far as ongoing business is concerned, simply set up new company with its own bank account or operate as a sole trader. The firm you do work for need never know that your last company has been wound up.
     
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    David198

  • #25
    Spongebob said:
    Hi David,

    ...
    Click to expand...
    Can't stop expressing that you are genius. From night, when I posted this thread, till your reply I've been having all sorts of questions which you, brilliantly, answered.

    Now I sit and think what else to ask, well I think no more questions :)

    Dividend -> Director's Loan -> Salary
    I'll request my accountant to do so.

    Company formation, already started.

    My next worry is getting a Bank account for the new company. Last time I had trouble in getting a bank account. Not sure how difficult it is going to be this time but I'll try.

    Well as I write few more questions popped up.
    1) I've unpaid invoices from client which normally pays 1-2 months after the date. As my company is already in winding up procedure and invoices remained unpaid, bank account awaiting to be frozen, I'm left with no option but to request them to pay to my personal bank account.

    Not sure if this is ok or can create problem during OR investigation?

    2) VAT for last quarter remained unpaid, since company is already going down I see no reason why to pay it?

    3) Bank Credit Card due
    Have got around £1000 to pay to the Bank, Once they freeze bank account would they pursue to recover it after company is gone?

    4) Any reason I should not use the same old address, my home address as well, for new company formation?
     
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    KateCB

    KateCB

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  • #26
    David, I have read the thread, and totally agree with Spongebob, however, I do find it very strange that as 'an IT consultant' you are only NOW 'learning spreadsheets' in order to keep some form of proper financial records.

    My grandaughter, aged 8yrs has a spreadsheet which she set up for herself for her pocket money and savings account, my Uncle aged 85 keeps a spreadsheet for his 'household accounts', so it is really strange that you, an IT 'professional' are only just learning about them!
     
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    David198

  • #27
    KateCB said:
    David, I have read the thread, and totally agree with Spongebob, however, I do find it very strange that as 'an IT consultant' you are only NOW 'learning spreadsheets' in order to keep some form of proper financial records.

    My grandaughter, aged 8yrs has a spreadsheet which she set up for herself for her pocket money and savings account, my Uncle aged 85 keeps a spreadsheet for his 'household accounts', so it is really strange that you, an IT 'professional' are only just learning about them!
    Click to expand...

    Kate you took it literally ;) LOL!

    I meant I'm learning the put myself on the right track w.r.t accounting ;) after having been whacked with mistakes. Which in turn meant I'm learning to taking control of my finances.
     
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    kulture

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  • #28
    David198 said:
    Well as I write few more questions popped up.
    1) I've unpaid invoices from client which normally pays 1-2 months after the date. As my company is already in winding up procedure and invoices remained unpaid, bank account awaiting to be frozen, I'm left with no option but to request them to pay to my personal bank account.

    Not sure if this is ok or can create problem during OR investigation?
    Click to expand...

    No it is NOT ok. It is the COMPANIES money. It will create a problem and may get them looking deeper if they think that some payments have been going direct to your personal account.
     
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    Business News

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  • #30
    David198 said:
    Hi Martin,
    Long story again, cut it short I pocketed all money from the company via dividend. I know I should not have done but it was not me who brought recession. Have to take care of personal life as well. any way deed has been done and can't be undone, have to get things sorted out now.
    Click to expand...

    For £40K corp tax you must have made £200K profit as a small enterprise. I'm not surprised the HMRC haven't looked compassionately upon your plight. They quite rightly look at it as you stole their tax revenue not that you spent your profits as dividends.

    One of my competitors entered an agreement with the HMRC to pay back so much in the £ of their tax liability. I look on that as the tax man supporting my competitors as I've paid my dues. I don't approve of tax laws but I do think they should be applied to everyone without exception, unless you are a big corporation of course then the rules don't apply.
     
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    kulture

    kulture

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  • #32
    internetspaceships said:
    The more I'm reading the questions, the less warm I'm feeling about this thread.
    Click to expand...

    I completely agree, but consider, the OP originally started out saying he will pay back HMRC and wants to... If HMRC choose to ignore the payment offer and instead choose to wind up the company and get nothing, then its their choice. Insane no doubt. The OP is simply taking HMRCs action to their logical conclusion. It would be fun however if the judge refused the winding up order and forced the OP to honour the original payment offer.
     
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    David198

  • #34
    Spongebob said:
    Hi David,
    What you are left with is a huge directors loan account - you owe the company all the excess dividends that have been paid to you while the company has not been making sufficient profits.

    The simple solution is to restate all these dividends in your accounts as salary and account for the appropriate PAYE and NI. Your accountant is able to do this. I asked my accountant recently about the feasibility of such 'restatement' while giving advice to another forum member and he told me that such work is simple and routine. I would hope that your accountant is as obliging as mine is..
    Click to expand...

    I've dropped e-mail to accountant and awaiting their reply.
    I was wondering if accounts have been filed, would it be possible to redo it?
     
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    Spongebob

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  • #35
    David198 said:
    I've dropped e-mail to accountant and awaiting their reply.
    I was wondering if accounts have been filed, would it be possible to redo it?
    Click to expand...

    If the accounts have been filed, they can hardly be showing dividends paid if there were not the profits to support them.

    I guess that your accountant could have simply posted any payments over and above legal dividends to your Directors Loan Account without discussing it with you. In which case, there's not much you can do about it...

    No, my advice on restating accounts applies only to periods for which no accounts have yet been filed.
     
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    David198

  • #36
    Spongebob said:
    If the accounts have been filed, they can hardly be showing dividends paid if there were not the profits to support them.

    I guess that your accountant could have simply posted any payments over and above legal dividends to your Directors Loan Account without discussing it with you. In which case, there's not much you can do about it...
    Click to expand...

    Yes exactly, this is the case. They did inform me, I had to request them to put it into director's loan as I had no other option.
     
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    Spongebob

    Spongebob

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  • #37
    David,

    What is the value of your Directors Loan Account on the last set of accounts to be filed with HMRC?

    What is its value on the most recent set of management accounts you have?

    The difference between the two could potentially be restated as being salary. There is nothing 'dodgy' or unlawful in this as far as I can see. It's just accountancy...

    Whether or not the OR goes after you for the earlier Directors Loan Account is in the lap of the gods.

    Do you have substantial personal assets?
     
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    Spongebob

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  • #38
    kulture said:
    I completely agree, but consider, the OP originally started out saying he will pay back HMRC and wants to... If HMRC choose to ignore the payment offer and instead choose to wind up the company and get nothing, then its their choice. Insane no doubt. The OP is simply taking HMRCs action to their logical conclusion. It would be fun however if the judge refused the winding up order and forced the OP to honour the original payment offer.
    Click to expand...

    Aint going to happen.

    The judge will only look into the winding up order if it is challenged by the company concerned. If no challenge is made, it is a simple rubber stamp exercise. Dozens of companies can be wound up by one judge in a day. It is simply a formality.

    Hardly anyone ever puts in a challenge, as it normally in the directors interests to have the company wound up without further delay.
     
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    David198

  • #39
    Spongebob said:
    David,

    What is the value of your Directors Loan Account on the last set of accounts to be filed with HMRC?

    What is its value on the most recent set of management accounts you have?

    The difference between the two could potentially be restated as being salary. There is nothing 'dodgy' or unlawful in this as far as I can see. It's just accountancy...

    Whether or not the OR goes after you for the earlier Directors Loan Account is in the lap of the gods.

    Do you have substantial personal assets?
    Click to expand...
    I'll check the accounts and will let you know.

    Personal assets? You mean a broken pc, a deadly sluggish laptop, a noisy printer, an old mobile phone?
    ;)
    No, not at all, I'm in rented house, got nothing.
     
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    Spongebob

    Spongebob

    Free Member
    Dec 9, 2008
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  • #40
    David198 said:
    Personal assets? You mean a broken pc, a deadly sluggish laptop, a noisy printer, an old mobile phone?
    ;)
    No, not at all, I'm in rented house, got nothing.
    Click to expand...

    In that case you can stop worrying right now.

    Just let the company get wound up and attend the interview with the OR with a spring in your step. Technically the OR can pursue you for the outstanding Directors Loan Account, and if you cannot pay it back make you bankrupt.

    However, it is very unlikely that the Official Receiver will force you into bankruptcy - after all they would simply be making more work for themselves in the sure knowledge that no money would be realised from the exercise.

    There is a very good chance that they will simply write off the debt. They may even help you to restate some of the debt as salary as it will enable them to get your case off their desk more quickly.

    If however, you get a member of the awkward squad as your interviewer, and they attempt to put a payment plan into operation, you have a choice; go along with it and pay off the debt over a period of time, or go bankrupt and potentially pay nothing.

    Remember that your creditor after the company is wound up will be the Official Receiver, not HMRC. Although they are both government agencies, there is no direct connection between them. The OR could well be your new best friend - treat them with courtesy and respect.

    You do however, hold all the cards in any negotiations, as you have the ultimate sanction of going bankrupt.

    Incidentally, bankruptcy should not harm your prospects of earning a living whatsoever. In similar circumstances it was the best thing I ever did!

    Keep me posted how you get on.

    Bob
     
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