Debt to HMRC advice please...

[EvaCustard]

Afternoon everyone -

I've been trawling through this forum looking for a situation similar and I can't quite find anything.

Our situation is this - my husband is the sole director of his Ltd Co, I am the Co. Sec. - The company has only been trading for 2 and a bit years but we owe a CT debt to HMRC along with a small VAT debt and there is an o/d Directors loan account also. I only discovered the debts quite recently when i discovered my husband had been taking money from the company that should have been the CT & the VAT payments.

My husband is still in work and still plans to contract (he's in IT) for the foreseeable but I am terrified about the issue of how much we (or rather the company) owes. It is keeping me awake at night and the letters coming from HMRC are quite simply terrifying.

I get that my husband has acted inappropriately and I don't dispute the debt at all but we don't have the money to pay it back as quick as HMRC want and the Accountant is less than helpful. I'm afraid to ask this question to them as I don't want the embarrassment of it all...

What I want to know is.... can we wind up that company and open another one? Before anyone thinks I am looking to shirk our debt, I absolutely am not - I'm just looking for a way to start afresh and give us some breathing space.

I'll be looking after the finances for the new Co and my husband will not have access to the funds like he's had with the old co. I'll then hopefully be able to come to a repayment plan with HMRC to clear the CT bill. I don't know who we'd repay the o/d DL account to though? Is that the OR?

I'm not sure if I've made any sense but if anyone could offer advice, I'd be really grateful.

Thanks

 

[Energise Accounting]

The fact is you owe HMRC the money my advice would be to try and come up with a payment plan to satisfy the debt.

Forgive me for saying this your husband seems rather irresponsible when it comes down to financial matters so I suggest you deal with them.

You can go into bankruptcy however, HMRC may take civil action first and it is possible that the court may not allow your husband to go bankrupt.

The key thing is you cannot do nothing as the situation will just get worse. The bottom line is your husband has made a profit and chose not to pay his tax and collected VAT and not passed it on to the revenue.

 

[EvaCustard]

Bankruptcy isn't an option - I don't want to lose our home. That thought is what is keeping me awake at night. We have a small child.

Yes, he is irresponsible and I will be dealing with the finances from now on but I just need some breathing space.

 

[john1989]

If your willing to pay the tax over time, I would be reluctant to close the existing company.


I would phone HMRC and try and arrange an affordable payment plan that will enable you to pay what it due.


I would then engage a new accountant that is more approachable and helpful.

 

[EvaCustard]

If your willing to pay the tax over time, I would be reluctant to close the existing company.


I would phone HMRC and try and arrange an affordable payment plan that will enable you to pay what it due.


I would then engage a new accountant that is more approachable and helpful.

Thanks - I'm not one to shirk a debt, even one that isn't of my own doing. Ignorance isn't a defence, I know that. I'm just terrified of losing everything.

 

[Energise Accounting]

Just phone HMRC and organise a payment plan quickly. Just stick to the agreement and pay the rest of your taxes on time.

As for changing your accountant I don't think that is necessary it is not his fault your husband spent the tax money.

 

[john1989]

Many businesses fall behind with paying their taxes or other creditors at one time or another. It is nothing to be embarrassed about, and you seem willing to remedy the situation rather than bury your head, which is a good thing!

The best course of action is to open talks with HMRC.

Ensure that before you phone HMRC, you have worked out what you need to live and the most you are able to pay weekly or monthly in instalments.

 

[EvaCustard]

Many businesses fall behind with paying their taxes or other creditors at one time or another. It is nothing to be embarrassed about, and you seem willing to remedy the situation rather than bury your head, which is a good thing!

The best course of action is to open talks with HMRC.

Ensure that before you phone HMRC, you have worked out what you need to live and the most you are able to pay weekly or monthly in instalments.

Thanks for this - really helpful.

 

[EvaCustard]

it is not his fault your husband spent the tax money.

I never said it was! However, I was looking for help not judgement.

 

[Newchodge]

First of all, bear in mind that the debt is not yours, but the ltd company's. The limited company does not own your house, so it cannot be taken to pay the company's debt.

Work out the company's business plan, being realistic about income and expenditure. Work out whether or not the company can afford to pay its debts. if it cannot, then it is insolvent and must cease trading. Have a look at the Spongebob plan in the Insolvency forum.

If the company can continue, then talk to HMRC and offer a realistic repayment plan. If that is rejected go back to the Spongebob plan, close the company and start over.

The Director's loan account (DLA) is only an internal book keeping matter - if the director has taken money from the company that was not salary or dividend, the money taken is owed, via the DLA, to the company. If the company should have paid salary to the director but could not afford to do so the money is owed, via the DLA to the director.

Take a deep breath and stop panicking too much. You can sort this out.

 

[EvaCustard]

First of all, bear in mind that the debt is not yours, but the ltd company's. The limited company does not own your house, so it cannot be taken to pay the company's debt.

Work out the company's business plan, being realistic about income and expenditure. Work out whether or not the company can afford to pay its debts. if it cannot, then it is insolvent and must cease trading. Have a look at the Spongebob plan in the Insolvency forum.

If the company can continue, then talk to HMRC and offer a realistic repayment plan. If that is rejected go back to the Spongebob plan, close the company and start over.

The Director's loan account (DLA) is only an internal book keeping matter - if the director has taken money from the company that was not salary or dividend, the money taken is owed, via the DLA, to the company. If the company should have paid salary to the director but could not afford to do so the money is owed, via the DLA to the director.

Take a deep breath and stop panicking too much. You can sort this out.

Thank you so much. Knowing they can't take the house is such a relief - I cannot tell you how much.

 

[Energise Accounting]

With respect @EvaCustard I gave you help in my first post. the bottom line it is nobody's fault apart from your husbands if you choose to go bankrupt your husband will no longer permitted to be a director of a company until he is discharged.

 

[EvaCustard]

With respect @EvaCustard I gave you help in my first post.

Apologies, I didn't mean judgement from you - I meant our Accountant.

 

[AllUpHere]

My first thought was resign as Company secretary, and then get a better husband. However, I get that you probably aren't in the mood for jokes like that.

Things probably really aren't as bad as you think. As has been mentioned above, HMRC are very open to payment plans. It must seem scary the first time, but there are people around who pretty much make a living getting into the situation you are currently finding yourself in. Spend the afternoon calling HMRC and the VAT and I can almost guarantee you will have a decent nights sleep tonight.

 

[john1989]

Don't forget to give your husband a hard time ;-)

 

[EvaCustard]

Don't forget to give your husband a hard time ;-)

Trust me - he is making himself comfortable in the Dog House!!

 

[EvaCustard]

My first thought was resign as Company secretary, and then get a better husband. However, I get that you probably aren't in the mood for jokes like that.

Things probably really aren't as bad as you think. As has been mentioned above, HMRC are very open to payment plans. It must seem scary the first time, but there are people around who pretty much make a living getting into the situation you are currently finding yourself in. Spend the afternoon calling HMRC and the VAT and I can almost guarantee you will have a decent nights sleep tonight.

Thanks - I appreciate the response I think I need to get all my ducks in a row and then call them. Which will involve most of the night sitting at the kitchen table and working out exactly where we stand, what we owe and how to pay it back.

 

[AllUpHere]

Roughly what kind of figures are we talking? Few grand or what?

 

[Energise Accounting]

HMRC are approachable and like any other organisation they would rather you pay them over time than not at all. make his life hell until this is sorted out.

 

[EvaCustard]

Roughly what kind of figures are we talking? Few grand or what?

The CT debt is about £9k (I think) and we are 1 month behind with the VAT. Apparently based on the draft accounts the o/d DL is about £25k - I don't mind telling you that these figures are hugely scary for me.

 

[EvaCustard]

HMRC are approachable and like any other organisation they would rather you pay them over time than not at all. make his life hell until this is sorted out.

I've heard some horror stories but hopefully I will be able to come to an agreement with them.

 

[john1989]

HMRC and horror stories are no uncommon.
If you get a jobsworth at the other end of the phone and you don't seem to be getting anywhere, just put the phone down and call them back.

 

[EvaCustard]

HMRC and horror stories are no uncommon.
If you get a jobsworth at the other end of the phone and you don't seem to be getting anywhere, just put the phone down and call them back.

Will do - thanks John.

 

[Newchodge]

You can go into bankruptcy however, HMRC may take civil action first and it is possible that the court may not allow your husband to go bankrupt.

Why are you talking about personal bankruptcy when this is about a limited company?

Under what circumstances would a court ever 'not allow' someone to go bankrupt?

 

[AllUpHere]

The CT debt is about £9k (I think) and we are 1 month behind with the VAT. Apparently based on the draft accounts the o/d DL is about £25k - I don't mind telling you that these figures are hugely scary for me.

It's all relative isn't it. If you are making 50 grand per month profit then those numbers are easily sorted. If, however, you are making 50 grand per year the figures start to be more of a problem.

I'm not an accountant, but my advice would be to work out what you owe, and also work out exactly what you can afford to pay back and when. At least that way you are able to make an offer when you are on the phone. It will also probably ease the tension if you can make a token gesture payment there and then, so if you can get your hands on a few quid that may help. Maybe do an income and expenditure spreadsheet, just so you have all of your figures to hand when you speak to people.

Best of luck.

 

[EvaCustard]

It's all relative isn't it. If you are making 50 grand per month profit then those numbers are easily sorted. If, however, you are making 50 grand per year the figures start to be more of a problem.

I'm not an accountant, but my advice would be to work out what you owe, and also work out exactly what you can afford to pay back and when. At least that way you are able to make an offer when you are on the phone. It will also probably ease the tension if you can make a token gesture payment there and then, so if you can get your hands on a few quid that may help. Maybe do an income and expenditure spreadsheet, just so you have all of your figures to hand when you speak to people.

Best of luck.

Indeed -

Thanks again for your help.

 

[UK Contractor Accountant]

With respect @EvaCustard I gave you help in my first post. the bottom line it is nobody's fault apart from your husbands if you choose to go bankrupt your husband will no longer permitted to be a director of a company until he is discharged.

It is the company that will go bankrupt not the DIRECTOR.

It will up to HMRC if they want to wind the company up for non payment of debts. If the OR is appointed they then can chase the DIRECTOR for his overdrawn Director Loan Account.

 

[MyAccountantOnline]

HMRC and horror stories are no uncommon.
If you get a jobsworth at the other end of the phone and you don't seem to be getting anywhere, just put the phone down and call them back.

I'll second that advice some of the individuals that work in HMRC debt recovery are truly awful.

 

[boring-friday]

I'd get a new accountant straight away, he should be helping you with whats best to do now, is that not what hes paid for?
Nice to see you actually plan on paying the debt back, from reading this forum a lot of people would of just closed the company and started another one and 99% of the time been perfectly fine.

 

[EvaCustard]

I'd get a new accountant straight away, he should be helping you with whats best to do now, is that not what hes paid for?
Nice to see you actually plan on paying the debt back, from reading this forum a lot of people would of just closed the company and started another one and 99% of the time been perfectly fine.

I wouldn't be able to live with myself.... I'm wracked with guilt as it is. Guilt for not keeping a closer eye on things, guilt we owe so much - you name it - I'm beating myself up for it.

I should have been more careful, my husband is shit with money, I should have known better.

 

[SAC Consulting]

Eva, we are in a similar position and I am taking a deep breath and going down the SpongeBob route. Type SpongeBob in search bar and read the sticky on it, that is if you get no joy after ringing HMRC and offering a payment plan.

 

[EvaCustard]

Eva, we are in a similar position and I am taking a deep breath and going down the SpongeBob route. Type SpongeBob in search bar and read the sticky on it, that is if you get no joy after ringing HMRC and offering a payment plan.

Thanks SAC - I'll take a good look - Lots of reading for me tonight!!

 

[Jeremiah@RHJ Accountants]

Would your first point of call to be speak to your accountant and see what there advice is they should deal with HMRC for you.

I know it is your husband who is in the wrong but your accountant if you speak to them will be best placed to help you and speak too HMRC who will speak to them a lot better than you.

Don't worry too much as this can all be rectified and make sure your Husband stays in the dog house for a good while!

Let us know what your accountant says?

 

[SAC Consulting]

Our accountant asked us to go down the IP route but unfortunately we don't have £5000 to pay an IP. I am guessing Eva is in the same position.

 

[EvaCustard]

Our accountant asked us to go down the IP route but unfortunately we don't have £5000 to pay an IP. I am guessing Eva is in the same position.

We don't!! If we did, it'd be going straight to HMRC.

 

[EvaCustard]

Would your first point of call to be speak to your accountant and see what there advice is they should deal with HMRC for you.

I know it is your husband who is in the wrong but your accountant if you speak to them will be best placed to help you and speak too HMRC who will speak to them a lot better than you.

Don't worry too much as this can all be rectified and make sure your Husband stays in the dog house for a good while!

Let us know what your accountant says?

It should be my first port of call but the Accountant has pretty much just "tut tut'd" me and I'm totally mortified that we are in this position. They have already said we need to deal with HMRC ourselves.

I'll keep this thread updated with how we go on.

Thank you for all the help and advice so far, it's really appreciated.

 

[UK Contractor Accountant]

I am not sure that your Accountant has factored in the 25% holding tax that needs to be paid to HMRC on the £25K DLA.

If the DLA is not repaid within 9 months of the company's year end it is added to the Corporation Tax liability for the year.

I would check to see if they have factored this in the figures supplied as may effect your decision to let the company go and start again.

 

[Jeremiah@RHJ Accountants]

Very good point above you need to know the exact figures owed before dealing with HMRC.

That is shocking what your accountant has said and to be honest i would look for a new one who will help you with this and your affairs going forward.

Was your accountant not aware that the DLA was overdrawn and did they not advise you of the implications of this?

If you are having regular contact with you accountant say monthly or quarterly then this could of been avoided. Just speaking from experience as i would let me my clients know if they had taken too much out of their company.