dissolving ltd company with debts owed to HMRC

[katytaty]

hi
My husband and I have ran our company for 11 years. last 5 as ltd company. This year we have been 'bumped' for money owed to the point where December 2011 we had to dissolve. We owe HMRC/tax of about 35k as non payments meant VAT defaults and approx 10k to creditors. The ltd co. has made a loss for last 2 years but we have had good contracts and were confident until this year we could trade out.

There are no assets in the company - over last couple of years we gradually sold off as not needed and to help keep company afloat.

Our accountant has refused to file our accounts - he stated we can just pay the penalty to Companies house who will then strike us off. We are applying for strike off but are certain this will be opposed? what happens then? To our horror, the accountant states we owe the company 27k and when we asked how he stated we could not draw dividends on a company making a loss - but, he has always stated to draw NMW as a wage and apply the rest as dividends. We have a personal IVA in process.

Are we going to lose our home and everything? We have 3 kids (mids 40s ourselves) My husband attended hospital with a suspect heart attack at end of december and recently I found he had collected all the tablets in the house and was contemplating the unthinkable. I am so stressed out at the moment. help.

 

[jules12345]

You wont lose your home ...!

You will get the IVA in place which will probably end up writing a lot of your debts off - with an agreed monthly sum for repayments.

You will probably have to pay your mortgage - the government is doing a special deal with mortgages for married families in this situation.

http://www.direct.gov.uk/en/HomeAnd...gYourHome/Mortgagesandrepossessions/DG_174005

Regards
Jules

 

[katytaty]

Thank you for reply!
We have never defaulted on our mortgage - I am just worried about the personal liability that is attached from the limited company, and who could make us sell the house if it came to this. At what point can someone force us to declare bankruptcy?

What happens when strike off is opposed which I am sure it will be.

:redface:

 

[kulture]

Take a deep breath and calm down.

HMRC will certainly object to the company being struck off. If they notice. If you are lucky if will be struck off. If they object, simply reply to any and all correspondence and say that the company has no money, no assets and cannot pay. Invite HMRC to issue proceedings to wind up the company. The company's debts to HMRC are not personally guaranteed so although they will bully and bluff they cannot take direct action against you.

HOWEVER the official receiver who handles the winding up of the company MAY want to speak with you and MAY require repayment of dividends you took out of the company. This will occur if the OR takes the opinion that the dividends were withdrawn illegally. You can only take dividends from profit, and it sounds like you took dividends when the company was not making profit. It is a matter of arguing that you believed that the company was profitable when you took the dividends.

All this is a long way off. It is possible that the OR may not take this action. It is possible that the OR may consider that there is no point as you have no assets. It is possible that you can agree a re-payment schedule. It is possible that you could successfully argue down the 27K in dividends to a smaller amount. There are lots of possibilities.

 

[katytaty]

Thank youfor reply - very helpful. My worry is that our accountant states we owe 27K to the company but we have certainly not drawn this out as dvidends. I am worried that he at no time advised not to draw dividends when the company showed a loss - otherwise I would have increased the wage for my husband. can I ask the accountant to re adjust the some of the 27K as a wage? would this incur tax but would it be a lesser amount which could be paid back? Would our personal liability be added to our IVA?

:redface:

 

[kulture]

I would ask the accountant to itemise that 27K figure and justify it. Also ask him about his lack of advice regarding dividends and trading whilst insolvent (if you did). It may be an idea to get the opinion of another accountant, but that would be a further cost that the company cannot afford.

 

[Denat]

Last March i was in a very similar situation to you, owed a few creditors money with 5k owing to one and 10k in NI and PAYE and the last Vat bill was showing 11k . Not knowing what was going to happen was awful and i spent most of last year ( usually in the early hours of the morning when i couldnt sleep!!) searching and reading relevant posts on this forum. There are some great people on here to guide you through and their advice is good, they know what they are talking about. Search for posts with Spongebob in particular!! there is an insolvency practioner on here also ( sorry cant remember the name -Price?) and thanks to Kulture too who once put my mind to rest!
The worst part is worrying about losing your home and being made personally liable, its an awful time.
Last October i was notified that companies house was to strike the company off for not filing accounts whilst at the same time i was getting some scary letters from HMRC, i really did not know which way it would go. I took the advice of Spongebob and was consistent with my response to creditors that the company had no assets and therefore could not appoint a liquidator to wind the company up.( this is a repetetive process!!) but sure enough one by one the creditors dissapeared all except one. The company was struck off mid January without objection and the relief is immense i can tell you, however i was resigned to the fact that i may have to sit in front of an official receiver and explain away if i had too and this forum gave me the strength to do that if it had of come to it. Good luck with this and try to relax if you can, i wasted so much time and energy worrying for nearly a whole year i know its hard not too.
Just wanted to say a big THANK YOU to this forum and those who give so much time to it, i wanted to post the outcome of my situation in the hope it may help others.

 

[katytaty]

Thank you for reply! As you can see what time it is and sleeping has been and gone! I think this forum has been the most useful and I feel a bit better already. Will let my husband know and he will hopefully calm down a bit. Thank you everyone so far for advice.

 

[Charlie B ACS]

The IP you were referring to is Alan R Price, based in Wellingborough.

I can recommend him personally, as a friend, and professionally when we were passing work to him regarding debt owed to us.

 

[Spongebob]

Our accountant has refused to file our accounts - he stated we can just pay the penalty to Companies house who will then strike us off. We are applying for strike off but are certain this will be opposed? what happens then? To our horror, the accountant states we owe the company 27k and when we asked how he stated we could not draw dividends on a company making a loss - but, he has always stated to draw NMW as a wage and apply the rest as dividends. We have a personal IVA in process.

This really annoys me.

Your accountant has let you down badly. Accountants are fond of advising their clients to pay themselves a low salary and to take the rest of their income as dividends. This is fine so long as there are the retained profits within the company to pay such dividends. If there are not sufficient retained profits then the money you have taken out of the company will be recorded in your Directors Loan account.

This is what has happened here. What annoys me is that your accountant must have known the hole you were digging for yourselves yet did nothing to change the way you were paying yourselves. You would have been far better off paying yourselves a proper salary (even with the tax and NI implications) than building up a huge Directors Loan Account liability.

Presumably you have been submitting the VAT returns and so HMRC are aware of a debt owed to them. If they are not aware of any debt then they may well not oppose the strike off!

If they do object, my advice is as follows;

Adapt this letter to to your circumstances and send a copy to all your creditors.

Trade creditors will normally disappear as they have no wish to throw good money after bad in chasing an uncollectable debt. HMRC will eventually wind the company up and a liquidator will be appointed (normally the Official Receiver)

At your interview with the OR explain that you were acting on your accountants advice in taking 'illegal' dividends and that at no point did he advise you that these monies would be posted to you Directors Loan Account. In my experience the OR staff will be sympathetic to your situation if you can demonstrate that you behaved honestly and honorably in you conduct in running the company. I would anticipate that they would not pursue you for the overdrawn DLA unless you had obvious sizeable personal assets.

Even if they decide that the DLA should be repaid either in full or in part, you will be able to negotiate reasonable terms with the OR. The OR is not in the business of forcing people into bankruptcy - why would they?

Good luck. Hopefully your accountant is one of the company's creditors!

 

[katytaty]

hello Spongebob

I would like some advice about our VAT liability. In Jan 2011 we were visited by the VAT inspector. When we had sold a couple of our plant equipment, we could not pay the total VAT on the following return, and the next etc. It was alway clearly recorded in the VAT accounts as deferred. The amount was less than £10,000. The VAT inspector stated this could not be deferred. also when the plant was sold to the dealer - the outstanding finance was settle by the dealer directly to the finance company and we then received the balance. As the outstanding finance was settle directly to finance company and we had no record of the VAT transaction, it was not entered into our books. The VAT inspector stated we had to account for the full liability (after checking herself as she did not know!) When I contacted the finance company they stated the VAT documentation would not be sent to us but to the dealer. However the VAT liability was readjusted accordingly to our liability. I still have no documentation showing this VAT. The VAT inspector then wrote to us following the visit stating we were in the 'deliberate defrauders' programme.

Will this affect the VAT liability in relation to the Ltd company - can any be determined as personal liability?
:|

 

[kulture]

I would go to a very good accountant, and get them to discuss this with HMRC. I would also suggest that if the VAT inspector had to get more advice this is not a simple case.

 

[Nathanto]

The VAT inspector then wrote to us following the visit stating we were in the 'deliberate defrauders' programme.

Will this affect the VAT liability in relation to the Ltd company - can any be determined as personal liability?
:|

The bottom line is if HMRC are treating the outstanding VAT as deliberate evasion then liability can be transferred to the directors personally, however they have to show that you acted dishonestly.

Does the 'deliberate defrauders' letter explain whether it is the deferred VAT or full liability on the finance that is the issue?

If the former then presumably you were acting on your accountant's advice in which case I'd have thought it highly unlikely HMRC could claim/prove you acted dishonestly and you'll have correspondence to refute this.

If the latter then I agree with Kulture, I think you need to find some funds and see a specialist VAT accountant. Even if you did treat VAT incorrectly I'd have thought the fact this is a complicated case would go in your favour and a good accountant will get this resolved with HMRC.

 

[katytaty]

It didnt say on the letter it actually said very little. I called the inspector to ask what it meant but she just said it meant we would be 'monitored' again not a great deal of explaination from them. We did pay 500every month to clear the debt but they would not say this was acceptable in writing but we paid this anyway advising them when we could we would pay more. Never heard anthing more until we stopped trading.

 

[Alan R Price]

I agree with Spongebob that most people whose accountants advise them to draw dividends instead of salary don't seem to realise that if the company becomes unprofitable they should stop drawing dividends. My experience is that in many cases their accountants don't make this clear at the outset - in my view, negligently. I think it is only a matter of time before somebody sues his/her accountant for failing to give this advice.

 

[David A]

This year we have been 'bumped' for money owed to the point where December 2011 we had to dissolve.

This is the single most important fact to remember: insolvency was forced upon you by the default of others.

Until this point, you had good reason for believing the company was trading solvently. It follows then, if you play the simple layman to the OR or anyone else, that dividends were appropriate until you found you had been shafted by customers who owed you money. In the most simple terms, the company ran out of money due to it not being paid for work invoiced.

I would go to a very good accountant, and get them to discuss this with HMRC. I would also suggest that if the VAT inspector had to get more advice this is not a simple case.

Trouble is, it is unlikely that a 'good accountant' will discuss matters with HMRC without wanting recompense. And as the company is currently insolvent, the directors would need to pay this personally - with money they don't have.

This VAT issue, while complicated, is a debt of the company and so it will die with the company.

 

[Kath7179]

Katytaty - I have just been looking through this thread, which is several months old, as my husband and I have found ourselves in the same position in terms of having to consider the drastic decision to cease trading as sales have dropped so much and without any sign of improvement, we are are a small ltd company, we are and have always been upto date with vat payments, but we do owe hmrc approx £14K c't' and we have no way at all of paying this - with business drying up like it has, therefore we are having to consider all options , our accountant also gave us the same advice in terms of paying our "wages" by dividends and now I am really worried should we seek insolvency about the personal liability element - how have you progressed with this? we do have some company assets ( 2 vans and tooling however we do not believe these will pay off the debt should hmrc come after the company assets), thanks for updating, I am very stressed, I have 2 children and am so so worried we may lose our home especially if they make as personnally liable.

 

[DavidAshdown]

I agree with all the comments on here. What annoys me most is that most accountants are not what they used to be. They don't help small businesses and put their minds to rest and advise them properly. They just want easy fees. They are not real advisors just glorified book keepers.

 

[Slea]

Hi

I really could do with some advice. My wife and I put our Limited company into voluntary liquidation in November 2009 and we still have no closure. The last correspondence we received from our Liquidator was in February 2012 when they asked us for an up to date income and expenditure breakdown which we gave them demonstrating to them that we have no spare funds to pay back an overdrawn Directors loan account of £24,000.

They told us that they needed this information so that they could approach the inland revenue to ask them to right off the Directors Loan account and we have heard nothing. I have checked on companies house and it is still showing our company is in liquidation so obviously this whole thing is hanging over our heads and I am reluctant to contact the Liquidator again as all it seems to do is highlight us to them again and they ask us for more information !!

What if anything can we do to close this off once and for all?

 

[Spongebob]

Katytaty - I have just been looking through this thread, which is several months old, as my husband and I have found ourselves in the same position in terms of having to consider the drastic decision to cease trading as sales have dropped so much and without any sign of improvement, we are are a small ltd company, we are and have always been upto date with vat payments, but we do owe hmrc approx £14K c't' and we have no way at all of paying this - with business drying up like it has, therefore we are having to consider all options , our accountant also gave us the same advice in terms of paying our "wages" by dividends and now I am really worried should we seek insolvency about the personal liability element - how have you progressed with this? we do have some company assets ( 2 vans and tooling however we do not believe these will pay off the debt should hmrc come after the company assets), thanks for updating, I am very stressed, I have 2 children and am so so worried we may lose our home especially if they make as personnally liable.

If this downturn in trade has happened suddenly over a short period of time then you should have no worries. The fact that your company is liable for CT of £14k suggests that it was very profitable until recently - therefore any dividends paid can be defended.

Speak with your accountant. You need his help in justifying all dividends paid and minimising your directors loan accounts.

If the company is insolvent then you must cease trading immediately. Look through my other posts for my standard procedure for dealing with this situation at minimal cost or exposure.

 

[Alan R Price]

Katytaty - I have just been looking through this thread, which is several months old, as my husband and I have found ourselves in the same position in terms of having to consider the drastic decision to cease trading as sales have dropped so much and without any sign of improvement, we are are a small ltd company, we are and have always been upto date with vat payments, but we do owe hmrc approx £14K c't' and we have no way at all of paying this - with business drying up like it has, therefore we are having to consider all options , our accountant also gave us the same advice in terms of paying our "wages" by dividends and now I am really worried should we seek insolvency about the personal liability element - how have you progressed with this? we do have some company assets ( 2 vans and tooling however we do not believe these will pay off the debt should hmrc come after the company assets), thanks for updating, I am very stressed, I have 2 children and am so so worried we may lose our home especially if they make as personnally liable.

If the liabilities are limited to £14,000 CT and current VAT, I don't think you have much to worry about. Your company will probably have made losses in the final period which can, at least in part, be set off against previous profits to reduce the CT debt. There is a risk that, should the company be placed into liquidation, you would have to repay any money it has lent you, but I don't think this is unreasonable in the circumstances. That said, any liquidator would be prepared to do a deal for a lump-sum payment in full and final settlement or allow extended payments if you were unable to repay the money all at one go.

 

[Alan R Price]

Hi

I really could do with some advice. My wife and I put our Limited company into voluntary liquidation in November 2009 and we still have no closure. The last correspondence we received from our Liquidator was in February 2012 when they asked us for an up to date income and expenditure breakdown which we gave them demonstrating to them that we have no spare funds to pay back an overdrawn Directors loan account of £24,000.

They told us that they needed this information so that they could approach the inland revenue to ask them to right off the Directors Loan account and we have heard nothing. I have checked on companies house and it is still showing our company is in liquidation so obviously this whole thing is hanging over our heads and I am reluctant to contact the Liquidator again as all it seems to do is highlight us to them again and they ask us for more information !!

What if anything can we do to close this off once and for all?

The company will remain in liquidation until the liquidator has completed his administration of the case and will be struck off (cease to exist) four months after he has submitted his final return and the liquidation is concluded.

If you cannot afford to repay the money you owe the company the liquidator can obtain the creditors' permission to write off the debt and close the case. HMRC can take an inordinately long time to respond to correspondence from liquidators (I know this from experience!) so it may be that your liquidator is just waiting for a reply; or it could be that he has other priorities and has failed to progress your particular case. If you contact the liquidator it will probably bring matters to a head: the risk is that you might not like the outcome, although at least you will have certainty as to the way forward. If you find you are being pursued for a debt you cannot repay, there are various procedures you can use to deal with the issue, ranging from making nominal payments, to making yourself bankrupt - have a look at http://www.nationaldebtline.co.uk/england_wales/.

 

[katytaty]

hello
We are still in 'limbo'. Someone else has just advised me this morning that our limited company was actually dissolved 17th July this year - but we had heard nothing. I am not sure what happens now other than to sit and wait and carry on sending cease to trade letters to our creditors. I don't know how long it will take HMRC to start winding up proceedings as I am sure they will - but I am not sure if because we are 'dissolved' this means the same thing. I don't think so yet! But will keep you posted.
:redface:

 

[katytaty]

Hello
I have been advised this morning that our Ltd company was actually dissolved on 17th July - although we had heard nothing! I am not sure what happens now. I am sure HMRC would start winding up proceedings based on the amount we owe them but I am not sure. I know any one of our creditors can oppose companies house but then if this happens I am not sure what happens next. Will keep you posted!

 

[David A]

Hello
I have been advised this morning that our Ltd company was actually dissolved on 17th July - although we had heard nothing! I am not sure what happens now. I am sure HMRC would start winding up proceedings based on the amount we owe them but I am not sure. I know any one of our creditors can oppose companies house but then if this happens I am not sure what happens next. Will keep you posted!

I suggest that you go onto Companies House website and check the company's status. Or put your company's name into a search engine searching entries for the last 3 months - that'll show any listings in such things as the London Gazette.

 

[Alan R Price]

If the company has been dissolved/struck off, it no longer exists so HMRC cannot present a petition to wind it up. They will have to go to the trouble (and cost) of applying to have it reinstated to the register before it can be wound up - with little prospect of any return to creditors. I really don't think this will happen.

As David says, you can search quite easily to determine if it has actually been dissolved.

 

[katytaty]

I have checked on companies house and it states 'dissolved'. Can one of our creditors oppose this - we have one which was owed approx 6K.

 

[katytaty]

I forgot to ask - if the company is now dissolved can I apply to have the CCJ's removed? I think there is definetely 3 possibly 4 - if not how long do these affect credit?

 

[Spongebob]

I have checked on companies house and it states 'dissolved'. Can one of our creditors oppose this - we have one which was owed approx 6K.

They cannot now 'oppose' the striking off - it has already happened. Technically they can apply to have the company reinstated , but this is highly unlikely as the creditor must then wind the company up at some expense before taking their place in the queue with all the other creditors in the faint hope that there is a pay-out of a few pence in the pound from the Official Receiver.

Basically, it just ain't going to happen.

It's over. You've got a result! Crack open a bottle of bubbly and celebrate your success in escaping not only a £27k overdrawn directors loan account but also a VAT investigation!

Forget about the CCJs against the company. The company is now dead so they are irrelevent, and should have no impact whatsoever on your personal credit files. A limited company is a totally seperate legal entity and has its own credit file - there is no connection to yours.

Anyway, you currently have an IVA in place so your credit file is shot to pieces as it is!

You've still got your home and hopefully your husband is feeling better about everything. The news about the company's dissolution should be a great relief.

Concentrate now on your family and earning a living. Good luck for the future.

 

[David A]

I forgot to ask - if the company is now dissolved can I apply to have the CCJ's removed? I think there is definitely 3 possibly 4 - if not how long do these affect credit?

Not sure I understand what you mean by the above.

If they are company CCJ's, then as Spongebob has said, they die with the company. If they are against you or your husband for company debt, particularly if it was judgement by default, then you will need to apply to have it set aside as it is not your debt.

 

[Dexter85]

[FONT='Verdana','sans-serif']Hi[/FONT]
[FONT='Verdana','sans-serif']I've just read your messages on here and your situation is almost exactly like my own.[/FONT]
[FONT='Verdana','sans-serif']It’s been a great help to read it and I’m just about to strike my company.[/FONT]
[FONT='Verdana','sans-serif']Regards[/FONT]

and thanks Spongebob

 

[davedouble]

Hi,

Rather than start a new thread I thought to add my predicament here, hopefully you guys can help as my wife and I are at our wits end worrying what to do

------- I have written three different intros to this, but now scrapped-------

Basic points as I am sure you don't need to know my life story and what I was putting was looking pretty awful :redface:

1. Limited company, my wife as sole director, but I do all the work (now) on one computer (leased)
2. 2 years into company, 1st year accountants deemed we made profit enough to owed CT of £12K. We had one employee who we could ill afford and ended up paying them full wages while we took nothing.
3. We eventually got to point where we had to let employee go, they threatened to take us to tribunal unless we settled for a £6K payment. I borrowed money from parents to settle this.

Gratitude for you!

4. HMRC shortly afterwards visited us to make an arrangement to pay what now was £15K CT, on a £500 month until end of 2015.
5. 2nd year accounts were going to cost another £2500, even though we do all entries and calculations ourselves yr 1 and 2 in Quickbooks. We do not have funds and have parted with accountant who we feel has certainly not been worth the cost.
6. New accounts should have been filed at the end of Dec just gone but we cannot afford to keep the company going.
7. Apart from £15K to HMRC, we have £14K to a large supplier, who are accepting £100-200 a month currently, a soon to be set CCJ for £450 for another supplier.

We both have £30K personal credit card bills, from trying to keep the business going and paying employee over nearly 20 months.

Do we............

ignore all requests for payments and or write letters out to ask to wind up company. Or ignore CH requests to lodge accounts for last year and hope they close us.

Probably like anyone else here on this thread, I feel so stupid writing this and so worried about what is going to happen.

We are good people and I want to make things right, but we are in a place now where we are scrimping coppers together each day for our 6 year olds dinner money.

We cannot repay these companies and have no assets, the company leases it's only computer that I work on.

My wife has luckily found a part time dinner lady job at the school, if anyone can give us some advice that would be great.

Thanks

 

[David A]

2. 2 years into company, 1st year accountants deemed we made profit enough to owed CT of £12K. We had one employee who we could ill afford and ended up paying them full wages while we took nothing.

Something is not right here. If you were taking nothing out, and the business was scraping by, you would not have been making profits from which CT is payable. If you owed £12K CT, then at 20% (round figure just for illustration) you would have made £60K net profit.

3. We eventually got to point where we had to let employee go, they threatened to take us to tribunal unless we settled for a £6K payment. I borrowed money from parents to settle this.

Shame you didn't come on the forum then. You should have called their bluff. Worst case scenario is that should you have lost at a tribunal, the company would fold (thus gaining him/her nothing)as not have the funds to pay.

You don't mention VAT, but most likely you should have registered for this as, unless exempt supplies, you sound like you are over the threshold.

From your post, the company is going nowhere. It thus needs to be put down.

 

[davedouble]

Something is not right here. If you were taking nothing out, and the business was scraping by, you would not have been making profits from which CT is payable. If you owed £12K CT, then at 20% (round figure just for illustration) you would have made £60K net profit.



Shame you didn't come on the forum then. You should have called their bluff. Worst case scenario is that should you have lost at a tribunal, the company would fold (thus gaining him/her nothing)as not have the funds to pay.

You don't mention VAT, but most likely you should have registered for this as, unless exempt supplies, you sound like you are over the threshold.

From your post, the company is going nowhere. It thus needs to be put down.

Dear DavidA,

Thank you for such a speedy reply

The accountants were asking us to take a dividend to pay ourselves, which we did. But this was on a monthly basis, some as cash, which we used to pay the ex-employee their wages.

I really feel we have been naive, and let the whole thing blow into some huge debt.

I can safely say, we have not seen the £60K profit stated by the accounts, we have the huge debts and the ex-employee is now working for another company the day after his payment of £6K.

We were VAT registered and paid this.

I agree, we would like to terminate the company as soon as possible, but which route and how do we go about this?

Thanks again

 

[kulture]

Ok look at this thread http://www.ukbusinessforums.co.uk/forums/showthread.php?t=268551 entitled the spongebob plan. It is interesting reading and you will learn from it.

Basically you need to look at your accounts and truthfully consider if all the dividends were actually dividends IF you used them to pay the employee. Likewise you need to look at the dividends and offset them against any loan you gave the company (specifically you say you have put in £60K from personal credit card payments).

From the sound of it your ex-accountant has poorly advised you.

It MAY be worth investing a few hundred pounds on a new accountant to look at your books and advise you. This may result in that CT bill going away, as I cannot see how you made so much "profit" whilst pouring so much money into the company.

If the CT bill goes away, can you then pay your suppliers. If so then the company may be salvageable. Otherwise it has to be closed down. The spongebob plan is fine for this PROVIDED you are truthful in your replies.

The point to watch is these dividend payments. HMRC can go after you personally for the CT they think is owed, if they believe that these dividend payments were illegal (i.e. not out of profits). If however you put much of this money back into the company then it should be accounted for differently and not as dividend payments.

As an aside, £2,500 sounds like far too much to pay for an accountant to do the accounts if you have already done the bookeeping. I pay less than 1/3rd of this

 

[davedouble]

Ok look at this thread entitled the spongebob plan. It is interesting reading and you will learn from it.

Basically you need to look at your accounts and truthfully consider if all the dividends were actually dividends IF you used them to pay the employee. Likewise you need to look at the dividends and offset them against any loan you gave the company (specifically you say you have put in £60K from personal credit card payments).

From the sound of it your ex-accountant has poorly advised you.

It MAY be worth investing a few hundred pounds on a new accountant to look at your books and advise you. This may result in that CT bill going away, as I cannot see how you made so much "profit" whilst pouring so much money into the company.

If the CT bill goes away, can you then pay your suppliers. If so then the company may be salvageable. Otherwise it has to be closed down. The spongebob plan is fine for this PROVIDED you are truthful in your replies.

The point to watch is these dividend payments. HMRC can go after you personally for the CT they think is owed, if they believe that these dividend payments were illegal (i.e. not out of profits). If however you put much of this money back into the company then it should be accounted for differently and not as dividend payments.

As an aside, £2,500 sounds like far too much to pay for an accountant to do the accounts if you have already done the bookeeping. I pay less than 1/3rd of this

Thanks kulture,

I had already looked at the Spongebob Plan earlier, as I have been tracking a lot of his advice in the last few days, thanks for the suggestion tho.

We were very ill advised by the accountant who was a friend of a business adviser who again has invoiced around £6K throughout the year.

I really feel we have been so naive I feel sick!

The accountant suggested taking a dividend from the outset, as our adviser has told us they had reduced one clients tax from £90K one year to around 50p in a similar way

HMRC knew the whole story about the ex-employee and the person who visited was very, very understanding, I have letters to them to say the hardship we have been under.

Surely I can dissolve the company, refer them back to the whole story and they should see we have had terrible troubles.

Thanks again.

 

[David A]

Surely I can dissolve the company, refer them back to the whole story and they should see we have had terrible troubles.

There is only one question for you to answer, and this is quite simple:

1. Is the company cash-positive each month (meaning, apart from having to service the debt) does the company make a profit?

If the answer is yes, then is the company able to trade out of its predicament.

If the answer is no, then unless you are prepared to support the company with more money, it is insolvent. To discharge her obligations as a Director, your wife MUST cease trading immediately. She must then treat all creditors equally and advise them of this.
​

If the latter action is necessary, then unfortunately, it will mean that as well as letting down your creditors, you will also take a hit: you will still owe, personally, the credit card companies.

If you do not own your own home (or if it is in negative equity) you might need to consider if bankruptcy is appropriate. Work out how many years it will take you to clear this debt and the interest you will pay.

 

[davedouble]

There is only one question for you to answer, and this is quite simple:

1. Is the company cash-positive each month (meaning, apart from having to service the debt) does the company make a profit?

If the answer is yes, then is the company able to trade out of its predicament.

If the answer is no, then unless you are prepared to support the company with more money, it is insolvent. To discharge her obligations as a Director, your wife MUST cease trading immediately. She must then treat all creditors equally and advise them of this.
​

If the latter action is necessary, then unfortunately, it will mean that as well as letting down your creditors, you will also take a hit: you will still owe, personally, the credit card companies.

If you do not own your own home (or if it is in negative equity) you might need to consider if bankruptcy is appropriate. Work out how many years it will take you to clear this debt and the interest you will pay.

David, thanks

We are struggling each month, although I have work. We have made some terrible mistakes but I have the strength to work hard again to build a new business up without the weight of the old debts.

My wife is beside herself because she is sole director, again advice from this accountant

We cannot trade out of this. We have gone from a repayment to an interest only mortgage with the help of our mortgage company to help funds.

I have notified all personal credit card companies three months ago that we wanted all cards frozen of interest and charges and we have agreed a £50 a month payment plan to at least chip away at those.

A new start and a lot of hard work from me, not relying on any workforce could turn a new company into one we could make drawings in the future to pay back the cards.

I just need to liquidate the company as best as I can, I feel deep down the company we owe the £14K to are understanding of our position as we have been paying them back over a year so far.

If they wanted to take us to court over the debt they could have ages ago, they agreed that Court action would help no-one as we have no assets.

I feel so bad about this.

 

[Spongebob]

DaveDouble,

So sorry to hear about your plight - it sounds as if you have been on the receiving end of appalling advice and service from your accountant - not to mention extortionate charges.

The problems of the company are easily solved - it is clearly insolvent so cease trading immediately and follow my standard plan of writing to creditors. Use my new updated letter;

My main worry is your personal debt. Is it £30k each or between you?

You mention an interest only mortgage so clearly you are home"owners". The big question is do you have any equity in your home, and if so, how much? Remember that house prices are falling and that it is undoubtedly worth a lot less - particularly in a forced sale - than it was five years ago, unless you live in central London.

If you have little or no equity (or even better, negative equity), bankruptcy could be a very attractive option to you. Your house would not be in danger so long as you could keep up with the mortgage payments.

The other great bonus of bankruptcy is that it would eliminate any potential liability to repay an overdrawn Directors Loan Account.

 

[davedouble]

DaveDouble,

So sorry to hear about your plight - it sounds as if you have been on the receiving end of appalling advice and service from your accountant - not to mention extortionate charges.

The problems of the company are easily solved - it is clearly insolvent so cease trading immediately and follow my standard plan of writing to creditors. Use my new updated letter;

My main worry is your personal debt. Is it £30k each or between you?

You mention an interest only mortgage so clearly you are home"owners". The big question is do you have any equity in your home, and if so, how much? Remember that house prices are falling and that it is undoubtedly worth a lot less than it was five years ago, unless you live in central London.

If you have little or no equity (or even better, negative equity), bankruptcy could be a very attractive option to you. Your house would not be in danger so long as you could keep up with the mortgage payments.

Spongebob,

Thank you for taking the time to help us, I know how much you have given others hope in the past

We have two creditors, one £450 and the other £14K, both are big companies who 'maybe' will see we cannot fulfil our obligations, so I send them this letter.

HMRC is owed £15K over the next two years, next £500 payment is due at the end of Jan, we have scraped by with the first two payments, but will not have funds for this third successive month.

Do we inform them or wait for Companies House to close us after not filing accounts?

Our mortgage was an incredible £1500 a month repayment, I have got this down to an interest only £480 a month, which has allowed us to keep the mortgage up to date.

The £30K personal debt is between us and the four accounts they are with are all taking an agreed £50 a month to reduce the bills after we laid out in writing our monthly income and expenditure.

Thanks Again