DL to self assessment?

[SueAnon]

Good afternoon

Please could I ask a couple of questions about potentially closing my 9 year old business.

It’s looking very likely that the business will be receiving a revised utility bill of £20k for the last 3-4 years and with the BBL and decrease in sales, etc. I’m sure I will legally have to close.

If I closed tomorrow the business would owe £6k vat from the last two quarters, £7k corporation tax from last year, £13k BBL and the utilities of £20k. There are very minimal assets (less than £2k).

I’m considering the Sponge Bob method as there are no funds for an IP.

But I have a DL of £18k (accrued over the last 3-4 years or so).
My questions are
1. Can I transfer the DL to my self assessment? (I’ve taken approx. £15k PAYE wages per year in the last few years from this business, and slightly less from another.)
2. If so, would it make closing the business more straightforward?

Thank you for any advice.

 

[WaveJumper]

Welcome to the UKBF sounds like you are in a bit of a pickle pretty sure our insolvency experts on here will be able to point you in the right direction. What did you use your BBL for and how come you have racked up a 20k utilities bill, looking at you numbers on first take have you been trading whilst actually being insolvent ?

 

[SueAnon]

Welcome to the UKBF sounds like you are in a bit of a pickle pretty sure our insolvency experts on here will be able to point you in the right direction. What did you use your BBL for and how come you have racked up a 20k utilities bill, looking at you numbers on first take have you been trading whilst actually being insolvent ?

The BBL loan was used for the business and applied for correctly, and the utilities is due to years of problems/faulty meter. Unfortunately the last 3 years have been personally traumatic including the death of a young family member & long term family illness which has resulted in me not keeping on top of things. I've used personal money to keep going which I know I shouldn't have but I couldn't mentally cope with any more stress by not doing it if that makes sense.

 

[WaveJumper]

Hopefully to name but just a few @ChrisCallaghan @Lisa Thomas will pick this up and be able to steer you in the right direction

Big first step reaching out for help, wishing you all the very best

 

[UK Contractor Accountant]

Dissolution is unlikely to succeed with a BBL still outstanding.

Companies House are under Instruction not to let any company be struck off with a BBL outstanding unless it has gone through a formal Insolvency process whereby an IP has checked on the BBL application and use of the funds.

If you want closure you will need to appoint a Liquidator to wind the company up.

 

[Daybooks]

Your Company and personal affairs in this respect are not interchangeable.

Contemporaneously the payments to you were a director loan and at some point cumulatively exceeded £10,000 meaning there may be a benefit in kind in respect of interest chargeable thereon. There is also the possibility of section 455 taxes due.

To get it onto your self assessment tax return either as employment income or dividend income poses problems. Firstly, as employment income you would fall foul of the requirement to report in real time (under RTI) the payroll payments and account for any taxes due. Even if you did you would be possibly increasing those tax liabilities but the transaction would probably be seen as contrived merely to avoid paying taxes and or to discharge what would otherwise be a repayable director loan account.

Secondly, writing off the loan would ordinarily be treated as a distribution and be taxable as dividend income for you. However as there would need to be distributable reserves to do this then this route appears unavailable. If there were distributable reserves at the time the loan(s) were physically taken you would still be unable to classify them as a dividend because due process did not take place at the time and it would arguably amount to false accounting to do so.

I am sorry this may not be what you wanted to hear but hope it helps. You mentioned taking PAYE income from another source. If it is anyway related please give it the attention it deserves.

 

[Lisa Thomas]

Just double checking that the DLA is overdrawn and you owe the company £18k?

If so, what is your position to repay some/all of it?

Happy to have a chat with you to explore options.

 

[SueAnon]

Just double checking that the DLA is overdrawn and you owe the company £18k?

If so, what is your position to repay some/all of it?

Happy to have a chat with you to explore options.

Thank you, I'll send you an email.