How to end company

[Mozz01]

So my brothers now after a successful star in a mess

He’s working for nothing his small business is costing money to run and after spending all his savings and borrowing from me he’s finally accepting it has to end.

It’s a very small business, one part time staff as far as I’m aware the debts that will be outstanding is 2 months lease, electric and water ( about £2500)

I could probably cover these if it would make it easier

I suspect his tax will be a mess though as he’s not had an accountant this year and as money comes in it’s been shifted around to cover home bills etc and vice versa

He needs to get out and get a job asap any advice of best way to end business?

Ltd company he’s only director no staff as such could finish with no debt if I give him the money but the tax will be a problem going forward I think

Thanks

 

[MikeJ]

Get an accountant.

 

[Tables Force]

Tell your brother to Get an accountant.

Other than that it's probably out of your control, unless you're looking to cover for his mess.

 

[Mozz01]

What use is an accountant now?

He’s bust, from what I’m reading he can’t desolve as there’s debts and he can’t afford an IP

I’m unsure whether to pay the debts or pay for the insolvency practitioner

 

[Lisa Thomas]

Although the debts are estimated at c32.5k, if he hasn't been dealing with the company's taxes properly there may well be some company taxes owed to HMRC.

Is the company VAT registered?

Are there any employees?

Has he been drawing any money out of the company? If so he might owe an overdrawn directors loan back to the company.

Lots of questions need answering to be able to give advice.

Ideally your brother should be speaking to an IP before deciding that Liquidation is not appropriate.

 

[Mozz01]

Although the debts are estimated at c32.5k, if he hasn't been dealing with the company's taxes properly there may well be some company taxes owed to HMRC.

Is the company VAT registered?

Are there any employees?

Has he been drawing any money out of the company? If so he might owe an overdrawn directors loan back to the company.

Lots of questions need answering to be able to give advice.

Ideally your brother should be speaking to an IP before deciding that Liquidation is not appropriate.

Hi thanks for reoly

Yes VAT reg but turnover this year way below the 85k

Staff minimum and part time ie his daughter helps out at times

As for taking money out, he was paye to start with but for months has been unable to pay himself as takings dropped, it’s been a case of after a weekend any money taken goes on stock for the next week etc I genuinely think he’s operating at a loss this year

Spoke with him last night debts are circa 5k which are just operating expenses like rent, electric etc no credit accounts

Not sure what tax or vat would be due but this year I’d estimate takings 1.5k to 2k a month

 

[Newchodge]

If he is VAT registered, even if the turnover is £100 he has to account for VAT.

 

[Newchodge]

Has he continued to run payroll, even if he could not take the money, so the company owes him money?

 

[Mozz01]

Has he continued to run payroll, even if he could not take the money, so the company owes him money?

Don’t think so, at least not last few months

 

[Mozz01]

If he is VAT registered, even if the turnover is £100 he has to account for VAT.

He hasn’t, hence the question how to end it all

 

[Lisa Thomas]

Sounds like it might be a case for dissolving the company but I would want to speak to him to get more facts before giving that advice.

See here:

- YouTube

Enjoy the videos and music that you love, upload original content and share it all with friends, family and the world on YouTube.

youtu.be

and here:

Guidance for limited companies, partnerships and other company types

Guidance about registering, filing and disclosing information with Companies House.

www.gov.uk

 

[Lisa Thomas]

Is there a reason why he hasn't submitted the company's VAT returns?

 

[Mozz01]

Is there a reason why he hasn't submitted the company's VAT returns?

I guess not being able to afford an accountant

 

[Mozz01]

Sounds like it might be a case for dissolving the company but I would want to speak to him to get more facts before giving that advice.

See

Dissolving as in striking off?

 

[Newchodge]

Don’t think so, at least not last few months

He can still put that right, at least for the money he has taken out since April, which will reduce some of the tax liabilities.

 

[Lisa Thomas]

I guess not being able to afford an accountant

Unfortunately that's not considered an acceptable excuse. I believe it's a legal requirement as the company will have been acting as agent in relation to the VAT collected/due to HMRC.

 

[Lisa Thomas]

Dissolving as in striking off?

Yes - see the link.

 

[Mozz01]

Unfortunately that's not considered an acceptable excuse. I believe it's a legal requirement as the company will have been acting as agent in relation to the VAT collected/due to HMRC.

I do have SOME money I’m willing to help him with

It’s seems on odd situation to pay an accountant to sort out what tax/vat is owed when he isn’t in a position to to pay it

 

[Mozz01]

Yes - see the link.

I was under the impression that you can’t do this if there’s debts?

 

[Lisa Thomas]

I do have SOME money I’m willing to help him with

It’s seems on odd situation to pay an accountant to sort out what tax/vat is owed when he isn’t in a position to to pay it

I haven't suggested that.

I'm just setting a reminder that when someone is a director of a VAT registered Limited Company, they have a duty to ensure the VAT returns are submitted.

This ensure the tax affairs are up to date and HMRC are aware how much tax is owed.

 

[Mozz01]

Yes - see the link.

I’m reading you can’t do this if your behind with VAT/Tax?

 

[Lisa Thomas]

I’m reading you can’t do this if your behind with VAT/Tax?

Where does it say that, please?

 

[Mozz01]

Where does it say that, please?

AI Overview
+4



No, you cannot strike off a limited company if it owes money to HMRC
, as the company must not have any outstanding debts to creditors to be eligible for this process. Attempting to do so will result in HMRC objecting to the strike-off application, which will suspend the process. If the company is insolvent, you must explore a formal process like Creditors' Voluntary Liquidation (CVL).

 

[Newchodge]

AI Overview
+4



No, you cannot strike off a limited company if it owes money to HMRC
, as the company must not have any outstanding debts to creditors to be eligible for this process. Attempting to do so will result in HMRC objecting to the strike-off application, which will suspend the process. If the company is insolvent, you must explore a formal process like Creditors' Voluntary Liquidation (CVL).

That is a CVL. You would not be looking at a CVL.

 

[Mozz01]

That is a CVL. You would not be looking at a CVL.

No it’s striking off

I know is only AI but it states you cannot strike off if there are debts, instead you need to go down the CVL route instead

 

[DWS]

No it’s striking off

I know is only AI but it states you cannot strike off if there are debts, instead you need to go down the CVL route instead

Which is why you should not take advice from AI, because on this occasion it is wrong.
Yes you can apply to dissolve a Company even if it has debts, you just have to make sure you write to all the Creditors telling them your intensions which gives them the chance to object if they so wish.
HMRC do not always object if the Company owes them money, I have just had a Company dissolved with Companies House who have an outstanding VAT liability.

 

[Mozz01]

Which is why you should not take advice from AI, because on this occasion it is wrong.
Yes you can apply to dissolve a Company even if it has debts, you just have to make sure you write to all the Creditors telling them your intensions which gives them the chance to object if they so wish.
HMRC do not always object if the Company owes them money, I have just had a Company dissolved with Companies House who have an outstanding VAT liability.

Thank you very much.

Which is why you should not take advice from AI, because on this occasion it is wrong.
Yes you can apply to dissolve a Company even if it has debts, you just have to make sure you write to all the Creditors telling them your intensions which gives them the chance to object if they so wish.
HMRC do not always object if the Company owes them money, I have just had a Company dissolved with Companies House who have an outstanding VAT liability.

Is there a template letter anywhere for the creditors for this situation?

 

[Scalloway]

The template letter known as the Spongebob Plan is in the third post here.

The Spongebob plan !!

OK.. So I have read and re-read the many posts on closing down the company yourself. Seems simple enough and basically cost nothing too which is great BUT.. If I have read it all correctly it seems to hinge on monies being owed to those nice people at the revenue so what if the company only...

www.ukbusinessforums.co.uk

 

[Newchodge]

Thank you very much.

Is there a template letter anywhere for the creditors for this situation?

Will you treat HMRC as a creditor?

 

[Mozz01]

Will you treat HMRC as a creditor?

I don’t know, I guess so yes

Should I?

 

[eteb3]

I don’t know, I guess so yes

Should I?

You should do nothing, strictly speaking.

It’s an offence not to notify creditors. If your brother sent the creditor letter to a non-creditor, that would not, as far as i can see (or imagine), be an offence. So he can’t lose by treating them as one.

Afaik they monitor CH , so there’s no hope that a criminal failure to send will keep them off the scent.

 

[Newchodge]

I don’t know, I guess so yes

Should I?

Yes. How much are they owed? In VAT, corporation tax, PAYE and NI?

 

[DoolallyTap]

If he is still trading, stop now. If he is in leased or rented accommodation and there are any assets van, tools, computers, leaving them in place is the right thing to do, but you could do something else! --- Either pay a licensed insolvency practitioner like https://www.liquidationpeople.co.uk/ or just wait for a creditor to instigate it. Don't put any money in, don't do anything, don't get an accountant. Especially don't panic, just stop all activity and move on and wait. Liquidation will get rid of all the debt unless foul play is discovered.

 

[Mozz01]

Yes. How much are they owed? In VAT, corporation tax, PAYE and NI?

I sure at this moment but I’m sitting down with him tomorrow and going to try and make a start


Paye and NI should be zero, VAT and Tax hopefully 6 months or so which I would estimate around 5k

 

[Mozz01]

So I guess first steps are locking the door and sending letters to creditors to inform stopped trading?

Then wait 3 months before applying for strike off online?

 

[Newchodge]

I sure at this moment but I’m sitting down with him tomorrow and going to try and make a start


Paye and NI should be zero, VAT and Tax hopefully 6 months or so which I would estimate around 5k

If he has taken money from the company since April he could now run payroll to turn (at least some of) the money taken into salary, without incurring PAYE or NI. That would reduce the danger of his having an overdrawn director's loan.

 

[Newchodge]

If he is still trading, stop now. If he is in leased or rented accommodation and there are any assets van, tools, computers, leaving them in place is the right thing to do, but you could do something else! --- Either pay a licensed insolvency practitioner like https://www.liquidationpeople.co.uk/ or just wait for a creditor to instigate it. Don't put any money in, don't do anything, don't get an accountant. Especially don't panic, just stop all activity and move on and wait. Liquidation will get rid of all the debt unless foul play is discovered.

Overdrawn Director's Loan is likely given the description above.

 

[Lisa Thomas]

If he has taken money from the company since April he could now run payroll to turn (at least some of) the money taken into salary, without incurring PAYE or NI. That would reduce the danger of his having an overdrawn director's loan.

Cyndy

The directors cannot retrospectively re-write history as regards the DLA when the company is insolvent (especially with RTI).

 

[Newchodge]

Cyndy

The directors cannot retrospectively re-write history as regards the DLA when the company is insolvent (especially with RTI).

A director can issue a salary payment to themselves in December 2025 and use it to reduce the overdrawn DLA. There is no re-writing of history. They cannot, of course, issue a salary payment in December 2025 that purports to relate to a salary payment prior to April 2025.

 

[eteb3]

A director can issue a salary payment to themselves in December 2025 and use it to reduce the overdrawn DLA.

Is this not risking an illegal preference? If the salary was not generally paid, it would seem odd to suddenly pay it