company liquidation

Discussion in 'Accounts & Finance' started by hillway, Jul 21, 2011.

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  1. hillway

    hillway UKBF Newcomer Free Member

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    Im trying to make my ltd company insolvent -

    I have ceased trading 3 months ago ..and done nothing with it since

    Basically the only money the company owes is about 15 k corp tax and 3.5 k VAT
    i am a only a small one band IT consultant who has been trading 3 years .


    I have about 5k left in the business account and therefore cannot pay the corp /Vat due

    I have no assests in the business apart from a laptop which is now worthless or very little.



    im asking your advise on what to do next - do I appoint an IP to liquadate or is there any advise you can give me or follow to get this issue resolved.


    MAny thanks - hope you can help me / advise where i go from here.
     
    Posted: Jul 21, 2011 By: hillway Member since: Jul 20, 2011
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  2. hillway

    hillway UKBF Newcomer Free Member

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    no replies...has anyone any idea ?
     
    Posted: Jul 22, 2011 By: hillway Member since: Jul 20, 2011
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  3. Scalloway

    Scalloway UKBF Legend Free Member

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    An IP will cost the company. If HMRC are the only creditor then leave it to them to pursue the debts.
     
    Posted: Jul 22, 2011 By: Scalloway Member since: Jun 6, 2010
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  4. Chris Parry

    Chris Parry UKBF Newcomer Free Member

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    You could probably find an IP willing to wind the Company up for the £5k the company has. However, you would have to get a resolution agreed from the Creditors that the fee is paid from the assets of the Company, which if they reject, would mean no money for the IP. In reality, they will have time costs incurred from adminstering the liquidation, and would ask for the funds that way instead. An IP may ask you to indemnify the fee if they cannot draw it in full from the assets of the Company (the balance on account).

    Alternatively, as Scalloway said, you can let the Revenue wind the Company up. If you do that you shouldn't just draw the remaining bank balance for your own use, that is putting an asset beyond the reach of creditors. Are you due any remuneration you can draw? If there are funds left over, it may be wise to make the payment to Revenue while letting them know there won't be anymore due to the ceasation of trade. They will likely still pursue the Company, and have it wound up eventually anyway. That is unless they give up after it is struck from the register once you stop putting your returns in.

    To apply to have the Company dissolved, you must not have traded in the last three months. Given you have done that, you can apply to be removed from the register by appying to Companies House with the £20 admin fee. You will have to inform your creditors who may object within three months from now. Likely HMRC will object, but you never know, especially if you pay them the remaining balance and give them your latest accounts showing there are no further assets to claim.
     
    Posted: Jul 22, 2011 By: Chris Parry Member since: Jul 21, 2011
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  5. Spongebob

    Spongebob UKBF Ace Free Member

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    First of all, you don't make a company insolvent; it is insolvent if it cannot pay its debts and there is little or no prospect of it being able to do so. From what you tell us the company is already insolvent.

    The main legal requirement of a director of a company finding itself to be insolvent is to cease trading immediately. Trading while insolvent is unlawful and can jeopardise the protection a director has of limited liability for the company's debts.

    You have ceased trading. Excellent.

    The next legal requirement of a director finding himself in this situation is that he must treat all creditors equally, and not 'prefer' one over another. Creditors however, come in two types; 'preferential' and 'non-preferential'. Preferential creditors get first bite of whatever funds or assets remain in the company - only after they have been paid in full is any surplus distributed between the non-preferential creditors. Not surprisingly it is unusual for non-preferential creditors to get anything at all.

    Until a few years ago the taxman was a preferential creditor but now he is not. The reason I am going into detail explaining all this is because about the only group of people still classed as preferential creditors in the event of a company failure are employees of the company who are owed money for salary, accrued holiday pay, expenses etc. This includes directors!

    I am sure that you have not been paying yourself a proper salary over the last few months while you have been working hard at resolving the company's problems. There is no reason why you should not receive fair remuneration for this work, and I doubt that five grand fully covers it. A company which has ceased trading can still pay salaries to its staff if there is money in the bank.

    In your position I would pay myself the £5000 as salary owed and make the necessary calculations regarding PAYE and NI. This will have the effect of increasing the debt to HMRC by a grand or so. Keep all the paperwork immaculate.

    Then I would do nothing other than write to HMRC explaining that the company has ceased trading due to insolvency, has no funds or assets, and cannot afford to appoint an insolvency practitioner.

    You may well be subject to HMRC's debt collection procedures but just keep to the above line. There is nothing that they can do other than eventually issue a winding up petition. You are not liable personally for any debts of the company and they cannot take action against you or seize any of your possessions or property.

    In due course a winding up petition will arrive in the post and following a hearing at the High Court in London (which you just ignore completely) the company will be placed into liquidation and into the hands of the Official Receiver.

    All that remains is that you will be interviewed by the OR as to the reasons for the company failure and the file closed.

    Job done.

    It really is that straightforward (unless you've done something naughty which you haven't told us about!)

    Get in touch if you need any more help.

    Cheers
    Bob
     
    Last edited: Jul 24, 2011
    Posted: Jul 24, 2011 By: Spongebob Member since: Dec 9, 2008
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  6. hillway

    hillway UKBF Newcomer Free Member

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    guys just to Say many thanks for this sound advise,

    taken all your points on board..!!

    Ill let u all know how I get on....
     
    Posted: Jul 24, 2011 By: hillway Member since: Jul 20, 2011
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  7. Alan R Price

    Alan R Price UKBF Newcomer Free Member

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    If you want to get the thing over and done with you could actually apply to the court yourself to have company put into liquidation - you could use the money it its bank account to do this. You would need to instruct a solicitor, who will probably charge about £1,500-£2,000, including court fees. Have a look at the official receiver's website: http://insolvency.gov.uk/pdfs/guidanceleafletspdf/guidefordirectors.pdf.

    Otherwise, as Bob says, you could just sit back and let HMRC petition. Attempting striking-off is probably not appropriate because there is a likelihood HMRC will object.
     
    Posted: Jul 25, 2011 By: Alan R Price Member since: Jul 5, 2010
    #7
  8. Spongebob

    Spongebob UKBF Ace Free Member

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    I'd never heard of that option Alan, so thank you.

    The 'Sit back and wait for HMRC to petition' strategy still seems the best bet to me however.

    It is to your credit as an IP that you are happy to endorse it for small and straightforward cases.
     
    Posted: Jul 25, 2011 By: Spongebob Member since: Dec 9, 2008
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  9. hillway

    hillway UKBF Newcomer Free Member

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    Just a quick question on this regarding the VAT - shall I not pay anything.
    and shall i rite to the VAT office telling them of the company's situation as well as HMRC. ? :|
     
    Posted: Jul 29, 2011 By: hillway Member since: Jul 20, 2011
    #9
  10. Jenni384

    Jenni384 UKBF Big Shot Full Member

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    Yes, you have to treat all creditors equally (with the eXception of preferential creditors which HMRC are not), so write to the VAT office the same as you would the other tax offices.
     
    Last edited: Jul 29, 2011
    Posted: Jul 29, 2011 By: Jenni384 Member since: Oct 1, 2007
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  11. hillway

    hillway UKBF Newcomer Free Member

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    guys what do i do about submitting the accounts for the company the accounts are now overdue do i continue to do the returns. or just leave it . i have written to the creditors as per above advise . thanks
     
    Posted: Jul 31, 2011 By: hillway Member since: Jul 20, 2011
    #11
  12. Spongebob

    Spongebob UKBF Ace Free Member

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    I don't see that there's a lot of point doing the returns - any penalties that may be applied are to the company , not to yourself personally.

    There's always the chance that Companies House might strike the company off for non-submittal of returns before HMRC start winding-up proceedings...


    ...that would be a result!

    :D
     
    Posted: Jul 31, 2011 By: Spongebob Member since: Dec 9, 2008
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  13. Atilla

    Atilla UKBF Ace Free Member

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    Just as a 'what if' sort of question.

    What if dividends have been paid ?

    Even if no dividends paid, could the HMRC consider the Director negligent for not allowing for C.T.?
     
    Posted: Jul 31, 2011 By: Atilla Member since: Aug 25, 2008
    #13
  14. Spongebob

    Spongebob UKBF Ace Free Member

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    HMRC might consider it negligent not to allow for CT; however, once the company is in the hands of the Official Receiver HMRC have little or nothing more to do with the case. It is the OR who will form the view on whether the company has been run negligently or not.

    OR staff deal with insolvent companies all the time, and know only too well that almost nobody puts the CT monies away in a seperate account to paid over when they are due. Companies generally budget for the CT monies out of future revenue.

    When a company becomes insolvent due to an unforeseen change in trading conditions an inability to pay taxes as they become due is almost inevitable. THe staff at the OR office know and understand this.
     
    Posted: Aug 1, 2011 By: Spongebob Member since: Dec 9, 2008
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  15. Atilla

    Atilla UKBF Ace Free Member

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    ^^^^^^^
    Cheers Bob.
    Was just wondering. A spot on answer as usual.
     
    Posted: Aug 1, 2011 By: Atilla Member since: Aug 25, 2008
    #15
  16. BobBuilder

    BobBuilder UKBF Regular Free Member

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    When I read posts like this it seems as though the advice is,

    "start up a company, make a profit, pay yourself whatever cash the company has (including any VAT paid to it by your customer) as a salary, account carefully to HMRC for employers and employees NI and PAYE (but don't pay it) and then walk away". Repeat.

    Result - personal income entirely tax free.

    Makes the "paying part salary/ part dividend" approach to tax planning seem very lame in comparison.

    The advice is, in my opinion, wrong.
     
    Posted: Aug 1, 2011 By: BobBuilder Member since: Oct 25, 2010
    #16
  17. Atilla

    Atilla UKBF Ace Free Member

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    I don't think the advice is wrong, the ethics of the company/directors who operate like that are.
    Some individuals are scammers/chancers who will often operate on the wrong side of the ethical line, some are just plain ignorant (no excuse) of their obligations AND look for the chancers way out. Some are just unfortunate victims of circumstance who have tried to persevere but eventually lose the battle. Bob has covered this several times previously.

    Sadly, there doesn't seem to be a process after the event to sort out the 'wrong uns'. In fact, the system can actually seem to work against those who follow the official procedures (for want of a better description) - step forward some of the less savoury financial advisors and IPs.

    Bob has simply pointed out one of the least cost official procedures. If the authorities still fail to act against those who deliberately evade paying their dues, then what would you suggest??
     
    Posted: Aug 1, 2011 By: Atilla Member since: Aug 25, 2008
    #17
  18. BobBuilder

    BobBuilder UKBF Regular Free Member

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    To me, to advise,

    "start up a company, make a profit, pay yourself whatever cash the company has (including any VAT paid to it by your customer) as a salary, account carefully to HMRC for employers and employees NI and PAYE (but don't pay it) and then walk away"

    is analogous to

    • a solicitor advising a client that if they steal from a certain shop, they're unlikely to be caught.
    or
    • an accountant advising a client not to correct a mistake in a past VAT return because it won't be noticed.
    Both solicitor and accountant are correct but it's not professional advice - indeed both are probably estopped from giving such advice
     
    Posted: Aug 1, 2011 By: BobBuilder Member since: Oct 25, 2010
    #18
  19. Atilla

    Atilla UKBF Ace Free Member

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    So what should the advice be - asssuming there is nothing left in the pot?
     
    Posted: Aug 1, 2011 By: Atilla Member since: Aug 25, 2008
    #19
  20. BobBuilder

    BobBuilder UKBF Regular Free Member

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    Fair question.

    It's a problem (to me at least) promoting the idea that people can get entirely tax-free income in this way. However, additionally, in this case the business has £5k left

    however the OP is encouraged to say that they've not had enough salary so they should grab whatever is left, to the detriment of the rest of us:

     
    Posted: Aug 1, 2011 By: BobBuilder Member since: Oct 25, 2010
    #20
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