Does the SpongeBob apply when...

Discussion in 'Insolvency' started by SlowRatRacer, Nov 24, 2019.

  1. SlowRatRacer

    SlowRatRacer UKBF Contributor Free Member

    48 2
    If you owe corp tax and VAT to HMRC, would the SpongeBob method still work?
     
    Posted: Nov 24, 2019 By: SlowRatRacer Member since: Aug 18, 2016
    #1
  2. RobinBHM

    RobinBHM UKBF Regular Free Member

    314 106
    Possibly.

    If you mean can you send them a spongebob letter, then yes. The sponegbob method requires every creditor must be sent a letter, including the HMRC.

    Need more info for people to give a useful opinion.
    Do you have an overdrawn DLA?
     
    Posted: Nov 24, 2019 By: RobinBHM Member since: Apr 14, 2012
    #2
  3. Scalloway

    Scalloway UKBF Legend Free Member

    16,170 3,420
    It applies when the compnay does not have the funds to pay a liquidator.
     
    Posted: Nov 24, 2019 By: Scalloway Member since: Jun 6, 2010
    #3
  4. KAC

    KAC UKBF Ace Free Member

    1,195 269
    How much does the company owe to HMRC and in total?
     
    Posted: Nov 24, 2019 By: KAC Member since: May 7, 2017
    #4
  5. SlowRatRacer

    SlowRatRacer UKBF Contributor Free Member

    48 2
    We have taken (2 of us) est £3250 divi each so far this accounting year. We actually do not currently owe HMRC anything yet but will be around £7500 corp tax and £2500 VAT at the point in question. The rest of the debts are basically no existent. There is possibly enough to pay everything in full but just exploring options currently. As work is scarce and I would like to cease trading.
     
    Posted: Nov 24, 2019 By: SlowRatRacer Member since: Aug 18, 2016
    #5
  6. Adam93

    Adam93 UKBF Regular Free Member

    359 71
    Sounds like a significant overdrawn directors loan to me. Corporation tax of £7,500 suggests profits in the region of £37k. My first question is what’s happened to the profits?
     
    Posted: Nov 24, 2019 By: Adam93 Member since: Jan 18, 2018
    #6
  7. SlowRatRacer

    SlowRatRacer UKBF Contributor Free Member

    48 2
    I can't find DL anywhere on accounts or software, only directors current accounts. I am no accountant, so he takes care of that but I certainly can't see a DL anywhere.

    Other than our drawings it's all spent on crap cash flow as our payments go out weekly and a lot of the income can take up to 3 months sometimes but 60 days usually.

    We are currently owed £10,000 with work booked in to the tune of £25k by xmas. We have obviously stopped drawing at this point.
     
    Posted: Nov 25, 2019 By: SlowRatRacer Member since: Aug 18, 2016
    #7
  8. Adam93

    Adam93 UKBF Regular Free Member

    359 71
    Those debtors of £10,000 are assets of the company, so the spongebob plan isn’t for you. Once you collect the £10,000 you’ll have enough to pay corporation tax and the VAT. The company doesn’t sound insolvent to me.
     
    Posted: Nov 25, 2019 By: Adam93 Member since: Jan 18, 2018
    #8
  9. SlowRatRacer

    SlowRatRacer UKBF Contributor Free Member

    48 2
    I agree but I am exploring options should things get complicated.
     
    Posted: Nov 25, 2019 By: SlowRatRacer Member since: Aug 18, 2016
    #9
  10. Scalloway

    Scalloway UKBF Legend Free Member

    16,170 3,420
    That is another name for your Director's Loan Account. Is it an asset or a liability of the company?
     
    Posted: Nov 25, 2019 By: Scalloway Member since: Jun 6, 2010
    #10
  11. SlowRatRacer

    SlowRatRacer UKBF Contributor Free Member

    48 2
    So I spoke with the accountant and it turns out we are fine with DLA not overdrawn. I'd like to repeat what he said but couldn't if I tried. Thanks everyone.
     
    Posted: Nov 25, 2019 By: SlowRatRacer Member since: Aug 18, 2016
    #11
  12. fisicx

    fisicx It's Major Clanger! Staff Member

    32,687 9,685
    Did you tell him you plan to resign as a director? You can't have a director's loan and not be a director.
     
    Posted: Nov 25, 2019 By: fisicx Member since: Sep 12, 2006
    #12
  13. SlowRatRacer

    SlowRatRacer UKBF Contributor Free Member

    48 2
    No not yet as this will depend on the other directors decision whether to close, or he wants to keep running alone. Am I correct in saying if it's not overdrawn I don't owe anything?
     
    Posted: Nov 25, 2019 By: SlowRatRacer Member since: Aug 18, 2016
    #13
  14. fisicx

    fisicx It's Major Clanger! Staff Member

    32,687 9,685
    You owe the company the director's loan. You can't escape repaying this if you resign as a director.
     
    Posted: Nov 25, 2019 By: fisicx Member since: Sep 12, 2006
    #14
  15. SlowRatRacer

    SlowRatRacer UKBF Contributor Free Member

    48 2
    Okay, this is what I'm trying to figure out. If all we have done is take dividends and not over the net profit surely I don't owe anything?
     
    Posted: Nov 25, 2019 By: SlowRatRacer Member since: Aug 18, 2016
    #15
  16. fisicx

    fisicx It's Major Clanger! Staff Member

    32,687 9,685
    If it's just dividends then it's not a directors loan. Check with your accountant.
     
    Posted: Nov 25, 2019 By: fisicx Member since: Sep 12, 2006
    #16
  17. Mr D

    Mr D UKBF Legend Free Member

    22,821 2,747
    The company pays dividends? Or has yet to pay them?
     
    Posted: Nov 25, 2019 By: Mr D Member since: Feb 12, 2017
    #17
  18. SlowRatRacer

    SlowRatRacer UKBF Contributor Free Member

    48 2
    They are taken in advance against profit and also reserves brought forwards. It's explained to me that if we agree at this point now our dividends and declare, there is both enough profit already made against drawings and reserves.
     
    Posted: Nov 25, 2019 By: SlowRatRacer Member since: Aug 18, 2016
    #18
  19. SlowRatRacer

    SlowRatRacer UKBF Contributor Free Member

    48 2
    We basically take very little only £275 per week each. This tax year we have taken £7k each and the profit with reserves is basically £14k after tax and depreciation. The accountant words his final sentence: Providing the level of dividends noted above are agreed, these should just about cover the current director’s drawings.
     
    Posted: Nov 25, 2019 By: SlowRatRacer Member since: Aug 18, 2016
    #19
  20. Scalloway

    Scalloway UKBF Legend Free Member

    16,170 3,420
    Posted: Nov 25, 2019 By: Scalloway Member since: Jun 6, 2010
    #20