Closing company with outstanding corp tax - a different scenario

Discussion in 'Insolvency' started by soulboy, Mar 31, 2020.

  1. soulboy

    soulboy UKBF Newcomer Free Member

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    Hi there, I'm new and have read quite a bit about the different options including the Spongebob approach though wanted to ask for advice for my particular scenario:

    I stopped trading in my management consulting contracting limited company in September 2018 to take a permanent role with a company starting in November 2018.

    I am the only employee. My accounts ending March 2019 have just been completed and sent today. The company owes £7k in corporation tax and doesn't have the money to pay this.

    I want to close the company as soon as possible and would like advice on whether I can do this leaving the corp tax owing. There are no other debts, no director loan etc.

    I have read lots of scary stuff on here about collection agencies etc and I don't really want to put my wife through that if it escalated. I understand I can follow the Spongebob approach though wondered what the collective view was on this amount owed to HMRC and their probable response
     
    Posted: Mar 31, 2020 By: soulboy Member since: Mar 31, 2020
    #1
  2. Ian J

    Ian J Factoring Specialist Full Member - Verified Business

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    If you have Corporation Tax of £7,000 that would imply profits of £35,000 so if there is no money left at all HMRC might be interested to know what happened to the profits
     
    Posted: Mar 31, 2020 By: Ian J Member since: Nov 6, 2004
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  3. Mr D

    Mr D UKBF Legend Free Member

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    Their probable response is object to the dissolving of the company. So you go through the process, fill in the forms, it gets opposed.
    Then you wait.
    And wait.
    In the meantime HMRC will keep chasing the company for the money owed.

    Eventually companies house allows the company to dissolve.
     
    Posted: Mar 31, 2020 By: Mr D Member since: Feb 12, 2017
    #3
  4. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

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    Why do you feel you should not pay the corp tax. Do you also have a Directors loan?
     
    Posted: Mar 31, 2020 By: Chris Ashdown Member since: Dec 7, 2003
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  5. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    Option one is to try and dissolve it, HMRC will likely object and may Liquidate, although I think this is unlikely based on the figures involved and the current crisis.

    If you do nothing C House will eventually automatically strike the company off for non filing of returns.

    Assuming you owe a DLA another option is to repay the DLA and use those funds to pay the CTax.

    The only other alternative is to Liquidate the Company using the DLA repayments to cover the cost.
     
    Posted: Apr 1, 2020 By: Lisa Thomas Member since: Apr 20, 2015
    #5
  6. mattk

    mattk UKBF Newcomer Free Member

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    Or, in a desperate attempt to raise more taxes, the government make directors personally liable for unpaid Corporation Tax, VAT, PAYE/NIC if a company goes bust.
     
    Posted: Apr 1, 2020 By: mattk Member since: Dec 5, 2005
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  7. Ian J

    Ian J Factoring Specialist Full Member - Verified Business

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    If any government official read this forum they would probably come to the conclusion that it might be a good idea within certain limitations
     
    Posted: Apr 1, 2020 By: Ian J Member since: Nov 6, 2004
    #7
  8. mattk

    mattk UKBF Newcomer Free Member

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    There must be tens of billions to be raised, without putting a penny on tax.
     
    Posted: Apr 1, 2020 By: mattk Member since: Dec 5, 2005
    #8
  9. soulboy

    soulboy UKBF Newcomer Free Member

    6 0
    Thanks for the responses.

    I don't have any DLA - I'm wondering if that might be a better move.

    The truth is the company had some difficulties during that year (no work) and as only income in to our household I'd planned to use personal savings to pay the corp tax later down the line. Things change, and the virus has put my permanent role in to serious jeopardy so very nervous about money in general
     
    Posted: Apr 1, 2020 By: soulboy Member since: Mar 31, 2020
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  10. Mr D

    Mr D UKBF Legend Free Member

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    Yes could be done.
    Be a while before parliament reconvenes and they may be busy with far more urgent stuff like the economy or how to deal with so many dead people, a housing price crash due to far more houses for sale etc.
     
    Posted: Apr 1, 2020 By: Mr D Member since: Feb 12, 2017
    #10
  11. Mr D

    Mr D UKBF Legend Free Member

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    Maybe that much liability. Collecting it may be problematic.
    Remember, people whose company goes under are quite likely to have lost their source of wages. Zero income means how much repayment? Zero.
     
    Posted: Apr 1, 2020 By: Mr D Member since: Feb 12, 2017
    #11
  12. mattk

    mattk UKBF Newcomer Free Member

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    Houses, cars, bank accounts, holiday homes? I don't think anyone would shed a tear for fraudulent directors who pocketed 100% of their profits if they losing their homes.
     
    Posted: Apr 1, 2020 By: mattk Member since: Dec 5, 2005
    #12
  13. Mr D

    Mr D UKBF Legend Free Member

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    Presuming the directors have those things.
    And circumstances under which those things cannot be taken.
     
    Posted: Apr 1, 2020 By: Mr D Member since: Feb 12, 2017
    #13
  14. soulboy

    soulboy UKBF Newcomer Free Member

    6 0
    I have just learnt I will be offered redundancy or furlough in my current job so things are code red for me now. Furlough will not cover our family outgoings by some margin.

    I therefore would like to try dissolving the company with the £7k corp debt still owing. There is no DLA, no assets, no other debts. Given the current situation I cannot pay this personally. The company has not traded for 16 months.

    If I've interpreted advice correctly I should fill out DS01 and also write to HMRC with something similar to the Spongebob letter informing them of the situation - and then wait for response?
     
    Posted: Apr 9, 2020 By: soulboy Member since: Mar 31, 2020
    #14
  15. Scalloway

    Scalloway UKBF Legend Free Member

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    Yes
     
    Posted: Apr 9, 2020 By: Scalloway Member since: Jun 6, 2010
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  16. SteLacca

    SteLacca UKBF Ace Free Member

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    Furlough with 80% is still preferable to redundant with 0% income.

    Probably not strictly true. I'm going out on a limb and assuming that you took a relatively small salary with the remainder of income as dividends. Since the company could not meet it's liabilities, some of those dividends were illegal dividends and you could be pursued to repay them to the company to permit it to meet its liabilities.
     
    Posted: Apr 9, 2020 By: SteLacca Member since: Jun 16, 2016
    #16
  17. Mr D

    Mr D UKBF Legend Free Member

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    Expect HMRC to object to the closing of the company. So may be much later in the year or even next year before it dissolves.
    In the meantime HMRC will keep chasing the company for payment.
     
    Posted: Apr 9, 2020 By: Mr D Member since: Feb 12, 2017
    #17
  18. soulboy

    soulboy UKBF Newcomer Free Member

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    Partly correct - though no way as extreme as some......I would not describe the salary I took as 'relatively small' compared to the dividend, certainly an order of magnitude more than what others take.

    Anyone else have a view on SteLacca comment?
     
    Posted: Apr 20, 2020 By: soulboy Member since: Mar 31, 2020
    #18
  19. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    How was your remuneration drawn/treated?

    Was it processed as a wage and subject to PAYE and NIC deductions?
     
    Posted: Apr 21, 2020 By: Lisa Thomas Member since: Apr 20, 2015
    #19
  20. soulboy

    soulboy UKBF Newcomer Free Member

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    Approx £22k salary that PAYE and NIC was paid and approx £37k in dividends
     
    Posted: Apr 21, 2020 By: soulboy Member since: Mar 31, 2020
    #20