Drowning and need advice...

[pianosam]

Hi,
Sorry to bother you all but as the title says I.am disappearing into a black hole...
I have a 1 man ltd company which enables me to sell computer consultancy.

I have always struggled with tax payment and understanding all the issues and forms. In the last 3 years I have built up various debts to about 80k - split between corp tax (29k) Vat (35k) and about.10k pay//nic/personal tax (?).
I have received several threatening letters and calls from the debt management unit. I have a directors loan although I don't really know how big but the state of the company is down to me as I am the only employee.

I have a house worth at least 280k and a mortgage of 150k. I spoke to.the debt unit last month as they.phoned wanting all the cash. I explained that I couldn't pay (i am out of work at the moment - since march) but I hoped to take the money from my.house equity.

I spoke with my lender and asked to take out 80k on the mortgage and extend the payment term. For some reason they declined. I was told there ate 3 main considerations - income, credit rating, and Loan to value ratio. So my income last year was 90k, I checked and I have an excellent credit score and rating with both equifax and experian. So I am having my house revalued (i believe it is worth about 350k).


I agreed with the debt unit that I needed a month to try and get the cash from my house but this time period is now up. What can I do and expect from them?
I only have 2 options I think:
1. Ask for more time to try and take it from the house
Or
2. Ask the revenue to wait while I put it on the market to sell to get their cash.

I am really worried (i stopped sleeping at night months ago) as I have a wife and daughter to care for (neither of whom work).

Do you think the revenue will wait while I sell my house...I guess it could take a few.months. we will have to go into rented accomodation (but without an income this will be challenging)

Any advice.on what to expect Is appreciated.
sorry to bother you all,
Pianosam

 

[Spongebob]

HI Sam,

For God's sake stop worrying! Your situation is nowhere near as bad as you think.

YOU do not owe HMRC anything. THE COMPANY does.

From what you say the company is clearly insolvent; ie it cannot pay its debts and there is no prospect of it being able to. As director your clear legal obligation is therefore to cease trading immediately.

The whole point of limited liability is that directors and shareholders cannot be held personally liable for the debts of a limited company beyond the amount that they have invested in the company. This is a fundamental of English law going back hundreds of years.

HMRC cannot touch you personally. They cannot make you sell or re-mortgage your house and they cannot make you pay the money owed to them by the company.

Write to them explaining that the company has ceased trading due to insolvency and that it has no funds or assets. Add that neither you or the company can afford to appoint an insolvency practitioner to liquidate the company and that you will be applying to Companies House to have the company struck off. Do not speak with HMRC on the telephone under any circumstances - conduct all correspondence via snail mail.

HMRC may allow the strike off to go through unchallenged, but the more likely outcome is that they will initiate winding up proceedings though the High Court. Do not respond to any of their threats and let the company get wound up. The Official Receiver will then be appointed liquidator.

The Official Receiver (not HMRC) will look on your directors loan as an asset of the company and want it to be repaid. Anything you can do in the meantime to minimise the loan such as restating payments to yourself as being salary rather than loans will work to your advantage. A good accountant will help you here.

Meanwhile, concentrate on finding paid work which you can carry on either under your own name, or via a new company.

Remember, HMRC's threats are completely empty. Ignore them - they cannot take you to court for the company's debts.

 

[MASSEY]

HI Sam,

For God's sake stop worrying! Your situation is nowhere near as bad as you think.

YOU do not owe HMRC anything. THE COMPANY does.

From what you say the company is clearly insolvent; ie it cannot pay its debts and there is no prospect of it being able to. As director your clear legal obligation is therefore to cease trading immediately.

The whole point of limited liability is that directors and shareholders cannot be held personally liable for the debts of a limited company beyond the amount that they have invested in the company. This is a fundamental of English law going back hundreds of years.

HMRC cannot touch you personally. They cannot make you sell or re-mortgage your house and they cannot make you pay the money owed to them by the company.

Write to them explaining that the company has ceased trading due to insolvency and that it has no funds or assets. Add that neither you or the company can afford to appoint an insolvency practitioner to liquidate the company and that you will be applying to Companies House to have the company struck off. Do not speak with HMRC on the telephone under any circumstances - conduct all correspondence via snail mail.

HMRC may allow the strike off to go through unchallenged, but the more likely outcome is that they will initiate winding up proceedings though the High Court. Do not respond to any of their threats and let the company get wound up. The Official Receiver will then be appointed liquidator.

The Official Receiver (not HMRC) will look on your directors loan as an asset of the company and want it to be repaid. Anything you can do in the meantime to minimise the loan such as restating payments to yourself as being salary rather than loans will work to your advantage. A good accountant will help you here.

Meanwhile, concentrate on finding paid work which you can carry on either under your own name, or via a new company.

Remember, HMRC's threats are completely empty. Ignore them - they cannot take you to court for the company's debts.

Do you think this plan of action is ethical?

I mean, i hate paying tax as much as the next guy, but this is a form of tax evasion surely?

 

[Tom McClelland]

Do you think this plan of action is ethical?

I mean, i hate paying tax as much as the next guy, but this is a form of tax evasion surely?

Hmm, Mostly SB's advice seems sensible and practical, and it follows the principle of limited liability. A bust company can't pay its taxes and ltd liability means that no-one can come after the directors for that, unless wicked intent or recklessness can be demonstrated.

The only recommendation that raises my eyebrows is the restatement of the directors loan as salary. It seems to me that doing this in the full knowledge that the company would be unable to meet the resultant PAYE/NI liability is fraudulent, and would amount to trading while insolvent. But perhaps one of the accountants here will have a more definite opinion.

 

[DeanCo]

Directors are not normally held personally liable but can have personal liablilities where they have been found to have not forfilled their responsibilities. I am not saying that this is the case with yourself but in some cases improper action can lead to penalties and being held severally liable with the company for tax debts.

Where company directors have been shown to act properly they cannot be held liable for company debts. Although, this will not stop debt collectors from pursuing the debts and will invariably use their questionable tactics to pursue you even though the debts are unenforceable in court.

 

[pianosam]

Thank you for your thoughts but I don't fully understand...
My accountant tells me that because I have taken more money out of the company than u should to pay for things (ivf, college, etc) then hmrc will say that I as the director will be liable to repay this money. They will say that I have been negligent and caused the situation myself. I kind of thought I understood that bit and so I must find all the outstanding taxes and Vat ASAP otherwise they will take me to court and hand me a ccj and take my.house, sell it cheaply, and b*gger everything in our lives up (even more than I have already managed to).
I thought I had 'lifted the veil' of protection as it were for me being a director.

Am I right?
Really sorry if I have.misunderstood haven't had any sleep for a while ...

Spongebob are you a specialist in this area?

All the best,
Sam

 

[Strontium Dog]

I know that although you are not a specialist, you have provided much practical advice to insolvent businesses on here.

I'm intrigued as to why you suggested NOT phoning HMRC under any circumstances.

For the OP: I think if you follow SB plan the worst that will happen is that 18 months down the line a liquidator will ask you to pay the value of your overdrawn loan account back into the company, for them to pay some creditors with. The problem I think they will have is quantifying how much. What figure is shown as o/s in the most recent accounts, as they may well just take that.

Either way, except in the case of your own self assessment tax, I dont think YOU as opposed to the company has an immediate problem.

I think using a new vehicle for future trading would be very wise.

 

[MASSEY]

Directors are not normally held personally liable but can have personal liablilities where they have been found to have not forfilled their responsibilities.

A director is required to run the company in the best possible manner, it is the oath to the shareholders isn't it.

But, in this situation the op is the single party involved. The HMRC are now out of pocket from some one earning 90 thousand pounds a year and not bothering to employ an accountant for a few hundred quid.

The director of this company has clearly been negligent and should be held responsible by the tax man?

 

[BobBuilder]

Following on from the comments above and to help everyone understand the situation.

If I form a limited company with me as sole director, earn a £100k profit, pay myself £100k, because the company then has no money there is nothing HMRC can do about the £20k odd Corporation Tax that the company owes?

 

[Tom McClelland]

Following on from the comments above and to help everyone understand the situation.

If I form a limited company with me as sole director, earn a £100k profit, pay myself £100k, because the company then has no money there is nothing HMRC can do about the £20k odd Corporation Tax that the company owes?

Not only that, you can also apparently pocket the VAT that you charged on your income, and if you had any staff and you're brazen enough you can pocket the PAYE and NI that you deducted from them, too. If you record your own "trousering" as salary rather than director's loan there appears to be little comeback (and indeed working that way would also reduce the CT bill, albeit at the expense of greatly increased PAYE/NI, but who cares if you're not intending to pay up?)

Then start another company, rinse, and repeat.

It may not be ethical, or legal, but from a practical point of view it appears to be allowed since the impression I gain from SpongeBob's experience is that HMRC isn't particularly searching about the history of the business failure. Limited Liability is a cornerstone of the free market system but it does seem to be possible to abuse that privilege to the most extraordinary extent.

 

[Homer J Simpson]

A director is required to run the company in the best possible manner, it is the oath to the shareholders isn't it.

But, in this situation the op is the single party involved. The HMRC are now out of pocket from some one earning 90 thousand pounds a year and not bothering to employ an accountant for a few hundred quid.

The director of this company has clearly been negligent and should be held responsible by the tax man?

That's a bit harsh isn't it ? Negligent for what ? Not employing an accountant ?

Being negligent and making a mistake (or a series of them) doesn't make you negligent unless you did them on purpose, in which case they were not mistakes.........

pianosam, don't stress - get yourself some professional advice from an accountant who can look through your books and tell you exactly where you stand with regards to your liability/debt/loan to the company as well as what the company liability is to HMRC.

Good luck and let us know the outcome. And for God's sake, get some sleep ! You'll seriously screw up your health worrying and not sleeping then you'll be no good to your wife & daughter anyway, regarldess of any income

 

[Denat]

Hi found this forum during the night - Sam i am sorry for what you are going through, i have been up all night ( again) myself, its a horrible feeling. I ceased trading in April and wrote HMRC ( only creditor) telling them so. Cannot afford to appoint a IP and have about £5000 in vat owing and £10000 in paye/nic, trading for just over 2 years. All paye and vat paid up in first year but when things started to take a downturn i sometimes never paid over the full amount owing on the 19th in paye and nic but can show how it all went wrong/ kept paperwork etc that shows the series of events that led up to becoming insolvent. Ive only ever taken salary - no dividends and the first year i took no salary at all, made a small profit (1200 CT tax paid) and handed over £31,000 of paye/nic.
I am worried that i will be made personally liable because i sometimes never paid over the full paye/nic?? although because of cashflow i also did this the first year also but come may 2010 it was all paid up and i never even got a fine from HMRC, nothing was said. I assumed that the same would happen the second year and had every reason to believe that business would be even better.
From what i have read on here after the company has been wound up i will have to meet with the OR, i have everything ready to show him and will be able to show how i had every reason to believe that things would progress further the second year and show the reasons this did not come about. If i am asked about why i did not at times pass over the full amount due i am going to say that i had every reason to believe that the second year would go as the first and come May 2011 i would be able to top up as i had the first year.
But i am so stressed, some days i convince myself its all ok and then others my mind works overtime. I spent the whole of yesterday trawling the net looking for answers and frightening myself.
I have got myself in a state over this last night after reading about Leslie Livingstone v HMRC and him being made personally liable but cant seem to find out any fine details as to his situation. I would be grateful for any help/advice. Just some idea of how this may get viewed by OR/HMRC
Can i just say i think this forum and the people who give their time on here are great, i have read many related threads during the night and its a great help when your feeling lost and worried.

Andy

 

[MASSEY]

That's a bit harsh isn't it ? Negligent for what ? Not employing an accountant ?

It might be harsh to you, but in the real world where i live this is a serious topic we are discussing here.

If the op was in charge of this company and it had shareholders and employees they would be in the brown stuff now. Why should this person be let off?

Being negligent and making a mistake (or a series of them) doesn't make you negligent unless you did them on purpose, in which case they were not mistakes.........

Being negligent IS a serious matter in all walks of life.

 

[pianosam]

All many thanks but I am still a little in the dark...

I would like to understand more from Spongebob if at all possible.

I do have an accountant and she is driven mad by me sometimes. I am an honest person but have a series if financial challenges in my personal life which the revenue won't give a dam about (why should they) and this has led to me overspending from the company and falling into.this situation. It has built up over the last 3 years or so. I took 65k from my house 18 months ago with the intention of addressing the issue then but only half found its way into the business the rest was taken by a wedding and other bills.


Obviously I would prefer not to lose my home for my wife and daughter and get a ccj from the court and would be keen to find any creative or slightly cynical mechanism that didn't involve lying to achieve this but my situation has deteriorated so far I cannot see how to avoid these things.
Why should I not speak with the revenue? They have.my home number and called me up a month.ago.
I only have my books to give the OR and bank receipts (that reveal my overspend).

Can anyine recommend someone I can talk to who can advise me on.my options (including the cynical ones)? I am in the south of England.

My last years books have to go in so I could choose to cut the cake anyway it needed cutting I guess...

All the best,
Sam

 

[Homer J Simpson]

I live in the real world and everyone makes mistakes.

You want to kick up a stink about negligence, maybe you should be more concerned with the £360m overspend & other similar waste of taxes as apposed to the small amount owed by some guy who has messed up a little.

After all, they did have accountants didn't they ? So how did they get it so wrong ?

 

[MASSEY]

Im just looking at the bigger picture here, im not hating on the Op - Sam, im hating at the apparent flaw in the system, although i am dubious of Sams motives here but im a skeptical of everything.

I live in the real world and everyone makes mistakes.

They do yes, all serious mistakes have repercussions though.

You want to kick up a stink about negligence, maybe you should be more concerned with the £360m overspend & other similar waste of taxes as apposed to the small amount owed by some guy who has messed up a little.

Im concerned with all waste Homer, this country pays 400 million pounds interest a day. The only way this country will reduce debt is if people look at the bigger picture and contribute rather than scam the system.

After all, they did have accountants didn't they ? So how did they get it so wrong ?

The op siad so, but still has come to a business for for futher advice, and is most attracted to spongebobs answer?

I should be an MI6 special agent.

 

[CSBob]

Negligent for what ? Not employing an accountant ?

If that was against all advice to the contrary and then became one of the root causes of failure, then yes, that is negligent - in much the same way, for example, for not having the correct insurance, or of failing to meet all regulatory requirements.

I have to agree with Massey. When all is said and done, there is far too much "screw up and simply walk away" going on.

But then, as an 'unsecured creditor' on one-too-many occasions for comfort - and where the receivers' fees too often bloat to just consume all remaining funds and leave me out of pocket - I'm admittedly more than just a little biased on this subject!

In every other walk of life you pay for your own mistakes. So you should in business, too, if the mistake(s) are truly your own.

 

[Billmccallum]

Within the various posts by the OP, paid £90K salary, took out funds for IVF & wedding, but could not pay the bills that arise each quarter????????????????

Very much a case of living beyond ones means and expecting the taxpayer to foot the bill.

Best way out of the problem is to sell the house and buy a smaller [cheaper] one (that you can afford) and pay your bills.

 

[Homer J Simpson]

Wedding was paid for from money raised from his own house (from what I could make out) not from the business. Only half of what he took out on his house made it into the business due to the wedding etc.

 

[Homer J Simpson]

Im concerned with all waste Homer, this country pays 400 million pounds interest a day. The only way this country will reduce debt is if people look at the bigger picture and contribute rather than scam the system.

But you realise the 'system' is the scam, right ?

The £400m a day in interest is paid to who ? The biggest scammers of them all.........

 

[pianosam]

Guys,
My original post was honest and I have tried to describe my situation as fully and honestly as I can. My motivation is to understand what is likely to happen when the revenue call next and I am in the situation of not having managed yet to get the 80k fro my house.

I think my posts have been honest and I am a desperate man. I dont deny I have been stuid, negligent, and have created the situation on my own. I know that which is why I feel great shame and fear for the future of my family. I never intended to create this situation but I am truly poor with finances and paperwork. things slip by, pile up, slowly get away from me. My accountant does my.books annually and I struggle to make things right.

If I come onto your forum it is because I am looking for advice in an area where I.am out of my depth. One of you has suggested an approach that I had discussed with my accountant and she didn't know much about It but felt the level of directors loan would prevent me shutting the company down. But if someone knows more how things play out I am desperate enough to want to listen.

Be as cynical as you like I have no problem with that as I am in my own created mess.

Sorry for troubling you,
Sam

 

[kulture]

Denat, because you hijacked another thread, people are missing your question. Stop worrying, it is very unlikely thatyou will be found personaly liable on the information you have provided. You simply do not owe them enough for them to really go for it. That is not to say that debt collectors will not try. BUT all you say, all you continue to repeat, is the company owes this and the company is insolvent.

 

[MASSEY]

But you realise the 'system' is the scam, right ?

The system is not as i would personally like, on the other hand i would never empty a biz account to pay for a wedding. The op has been careless.

The £400m a day in interest is paid to who ? The biggest scammers of them all.........

The people who have bought gilts. Who else?

 

[Denat]

Denat, because you hijacked another thread, people are missing your question. Stop worrying, it is very unlikely thatyou will be found personaly liable on the information you have provided. You simply do not owe them enough for them to really go for it. That is not to say that debt collectors will not try. BUT all you say, all you continue to repeat, is the company owes this and the company is insolvent.

Thank you - i actually feel a lot better having written it down on her strangley enough. Trouble is i am a born worrier anyway and coupled with this unknown territory its not good.
Thanks again for your thoughts and advice and sorry i hijacked the thread ( first time on a forum)

 

[Spongebob]

Do you think this plan of action is ethical?

I mean, i hate paying tax as much as the next guy, but this is a form of tax evasion surely?

Nobody pays tax because it is 'ethical' to do so; people pay tax because the law demands that they do so and there are consequences for not doing so.

In this instance the law says that Sam does not owe any money to the taxman. If he does not pay any money to the taxman he is complying with the law. Since when was obeying the law 'unethical'?

Tax evasion is unlawful. Sam can comply with the law and still not pay any money to HMRC. Therefore it cannot be tax evasion.

If you don't like the law blame the lawmakers; don't blame me and certainly don't blame Sam!

Hmm, Mostly SB's advice seems sensible and practical, and it follows the principle of limited liability. A bust company can't pay its taxes and ltd liability means that no-one can come after the directors for that, unless wicked intent or recklessness can be demonstrated.

The only recommendation that raises my eyebrows is the restatement of the directors loan as salary. It seems to me that doing this in the full knowledge that the company would be unable to meet the resultant PAYE/NI liability is fraudulent, and would amount to trading while insolvent. But perhaps one of the accountants here will have a more definite opinion.

Obviously if accounts have been filed with HMRC showing a directors loan account then nothing can be done about it. For periods for which accounts have not yet been filed however, any payments made to Sam which his accountant has provisionally put into the loan account can quite lawfully be restated as salary - or anything else you want to call it for that matter.

Surely this is an accountant's job; playing around with the figures at the end of the year to the best advantage of his client. Its called 'accountancy'! Anything else is mere book-keeping...

My accountant tells me that because I have taken more money out of the company than u should to pay for things (ivf, college, etc) then hmrc will say that I as the director will be liable to repay this money. They will say that I have been negligent and caused the situation myself. I kind of thought I understood that bit and so I must find all the outstanding taxes and Vat ASAP otherwise they will take me to court and hand me a ccj and take my.house, sell it cheaply, and b*gger everything in our lives up (even more than I have already managed to).
I thought I had 'lifted the veil' of protection as it were for me being a director.

Am I right?
Really sorry if I have.misunderstood haven't had any sleep for a while ...

Your accountant is wrong.

HMRC will never get to give an opinion - it is the Official Receiver who will go through your books and pursue you for the overdrawn directors loan account.

Monies that you have taken out of the company that are not salary, dividends, or expenses will be recorded in your directors loan account. This is repayable to the company via the receiver as it is an asset of the company. The Official Receiver will be a lot more accommodating regarding a payment plan than HMRC. HMRC's involvement in the company's affairs ends as soon as the company is wound up.

Your protection from liability is intact.

All many thanks but I am still a little in the dark...

I would like to understand more from Spongebob if at all possible.

I do have an accountant and she is driven mad by me sometimes. I am an honest person but have a series if financial challenges in my personal life which the revenue won't give a dam about (why should they) and this has led to me overspending from the company and falling into.this situation. It has built up over the last 3 years or so. I took 65k from my house 18 months ago with the intention of addressing the issue then but only half found its way into the business the rest was taken by a wedding and other bills.


Obviously I would prefer not to lose my home for my wife and daughter and get a ccj from the court and would be keen to find any creative or slightly cynical mechanism that didn't involve lying to achieve this but my situation has deteriorated so far I cannot see how to avoid these things.
Why should I not speak with the revenue? They have.my home number and called me up a month.ago.
I only have my books to give the OR and bank receipts (that reveal my overspend).

Can anyine recommend someone I can talk to who can advise me on.my options (including the cynical ones)? I am in the south of England.

My last years books have to go in so I could choose to cut the cake anyway it needed cutting I guess...

All the best,
Sam

I advise people not to speak with HMRC on the telephone because it is all too easy to say the wrong thing when flustered in a stressful situation. HMRC will have a recording of the conversation and you will not; at a later time you will be relying on memory rather than a formal record such as you will have from written correspondence.

More to the point, there is absolutely no need to speak to HMRC! Send them a letter and your dealings with them are over. Any action they take will be against the company, not you. They may get a CCJ against the company, but so what? It won't affect your credit rating one jot.

If you want to speak to someone I'd be happy to. PM me.

Bob.

 

[Rolo Tomasi]

I dont want to worry the OP further but I wouldn't want people to get the idea that starting a company and deliberately failing to pay over tax is not covered under the legislation.

Section 121C of the Social Security Administration Act provides HMRC with the authority to seek to recover from the directors any PAYE/NIC which has not been paid over to them where that failure to pay is, in the opinion of HMRC, attributable to fraud or neglect by the director.

The tax case mentioned in an earlier post (Leslie Livingstone v HMR&C) is proof that this legislation is used. In this case the director was found to be personally liable for £60k of unpaid taxes.

 

[Spongebob]

No-one is suggesting that Sam has deliberately not paid the tax outstanding from his company. Like the vast majority in such circumstances, he's just got into a mess.

Yes, HMRC do have certain powers regarding recovery of outstanding PAYE/NI, but this is more pertinent in cases where tax and NI have been deducted from employees' wages and not paid over. In Sam's case he employs only himself and presumably has been paying himself mainly in dividends. The PAYE/NI component of his company's debt to HMRC will be small.

Anyway, just because HMRC have certain powers doesn't mean that they will use them. Like everybody else, they are run on a shoestring, are overworked, and understaffed. Inevitably, their efforts will be directed at targets where the biggest return for the least work will be effected.

A one-man band IT consultant is unlikely to feature in this category.

If Sam follows my plan the odds are stacked very heavily in his favour that he will emerge from this nightmare with his home, his family, and his livelihood intact. Not to mention his sanity.

 

[Rolo Tomasi]

You have advised Sam to restate overdrawn directors loan account as salary with full knowledge that the company does not intend to pay the tax/nic over to the Revenue. This would amount to serious neglect by an individual of the company and so be caught by the legislation.

In the tax case mentioned the director continued to pay himself knowing that the company could not afford to pay the tax and nic and ultimately had to pay the Revenue debts personally.

Also restating loans as salary will reduce the profit possibly meaning that any dividends paid would be illegal and have to be refunded to the company.

You are probably correct the the Revenue would not pursue Sam due to cost/time constraints however your posts were stating that this course of action was legal which it is not. I am just pointing out that there is a possibility that Sam could still be liable for the debts if he followed your advice.

 

[MASSEY]

He could still be liable but it's not likely they will get him is it. I think one man band ltd companies ought to have some better regualtion. But hmrc is already a shambles.

Tax evasion is unlawful. Sam can comply with the law and still not pay any money to HMRC. Therefore it cannot be tax evasion.

Tax evasion is exactly what our op sam has done.

Do you empty your bank account to pay for a wedding knowing full well you won't pay your corporation tax on time if at all?

Some one earning 90k a year is intelligent enough to know what they are doing.

Sam is both un ethical and a tax evader but looks like due to poor UK legislation he's got away scot free.

I don't like paying tax but paying some is better than none.

So much for big society

 

[Alan R Price]

I think it's a question of materiality. In the case of Denat, the debt is really pretty small, as these things go and I think it unlikely that there will be any serious consequences. In the case of pianosam however because the debt is in the region of £80,000 I think there is a real danger that if the company were to go into liquidation he could find himself being pursued personally for the debt by a liquidator, possibly funded by HMRC. At very least I would expect him to be on the wrong end of a directors' disqualification action by the Official Receiver since, on the face of it (and this is an observation, not a judgment), there does appear to have been some serious neglect of the company's tax affairs. In addition HMRC might, rightly or wrongly, form the view that the company had been set up with the sole intention of avoiding paying tax, which could lead to further action.

In legal terms, pianosam is of course not liable for the company's debts and currently has no direct liability for them; however particularly if the company goes into liquidation there could be problems ahead.

I am not going to give any advice as to the way forward. There will be many other considerations that cannot be discussed here which will dictate what happens next.

 

[pianosam]

Massey,
I have to say you seem to ignore my words completely. First, I didn't empty my company bank account for the wedding and secondly if I had known what I was doing I wouldn't have ended up in this position. Before you continue with your judgmental insults please actually stop and read my words.

Also, I don't actually want to cheat anyone of anything. You could help me by being less unpleasant and answering my original question.

Tax evasion is what Sam has done ...actually I haven't done anything particularly and that has been my undoing.

I haven't got away Scot free from anything..you have no idea of the stress and difficulty in my life. I am selling my home to provide the money to the revenue...so while you insult me and call me unethical...perhaps you could think on that.

With the speed of your negative judgements the big society certainly doesn't look safe in your hands either.

Thanks for your comments,
Sam

 

[northernant]

Hello pianosam,

I would be very careful about who you are accepting advice from. There seems to be plenty of good advice here but some not so good. SpongeBob is correct for the most part except that HMRC have recently toughened up dramatically and will not even consider writing these debts off. If left too long HMRC will wind the company up. If we are talking about 2/3 years ago you might have got away with writing to the creditors and trying to put the company into Dissolution but not today. With the greatest respect - giving advice from past experience is good. But on the basis that an Insolvent company was closed by way of dissolution in the past without any comebacks, then advising every other business owner to do the same should be likened to walking across a minefield and then waving your hands and saying 'come on I did it, you can too'.

We deal with HMRC every day and we know several of their representatives by name. HMRC have been tasked with getting in as much money as they can and as such have just engaged over 1,000 Bailiffs/High Court Enforcement Officers to collect as much of the tax that is owed as they can.

If you continuously close companies down and have no intention of paying any tax that is called Tax Evasion not Tax Avoidance, there is a difference.

I'll give you one example. Last week we had a new client who closed 2 of his companies down via Dissolution 18 months ago and HMRC have just reinstated both companies and the VAT liabilities in both entities still stand to this day on top of investigation as to why he closed the companies down via Dissolution when they were Insolvent. The form you have to fill out when processing a Dissolution is called a '652a' and on that form it clearly states that you are swearing by way of signature that the company is not Insolvent. So you see Dissolution really is not an option here. doing the right thing forst time is crucial.

HMRC will look to put the company into Compulsory Liquidation if left too long and the Official Receiver will be appointed by the Secretary of State to carry out the compulsory liquidation. The Official Receiver has two main duties: 1. To get the best return for the Creditors and 2. To investigate the Directors on their running of the company, usually going through the last three years or so worth of Annual Accounts, Management Accounts and Invoices, etc. Throughout this investigation the Directors are open to disqualification from future appointments as Director of another company, a fine and other implications if they are found to be guilty of what is called 'Wrongful Trading' under section 214 of the Insolvency Act 1986. In simple terms 'Wrongful Trading' is irresponsible trading and mismanagement of an Insolvent company by way of neglect of your Directors duties.

To summarise, be careful about who you pay and why. You should really cease to trade now if the company is Insolvent and seek professional Insolvency advice. To be safe you should always do the right thing within the realms of the law. Whoever you take advice from you should always look for testimonials and ask to speak to at least three of their previous clients to ensure you are making the right decision.

Best regards,

Tony

 

[pianosam]

Tony,
I haven't been able to get any work since end of March. I am trying but my market is very depressed and there is just nothing out there. In terms of creditors there is only hmrc. I am extremely stressed, depressed, etc. I am not a serial company shutter. this is my only one.

what you seem to be stating is that in the circumstances I have described in this thread I bear all the responsibility for all company debts to hmrc, is that what you are saying? the limited liability counts for nothing and is all my liability?

I am confused by your term.dissolution. is this winding up? I guess I am at the point where I cannot see anyway of clearing what I owe to hmrc. I cannot currently get any money from my mortgage to put into the company. I don't have any other resources and feel numb. I have no where to turn next. I have been told on this forum that liquidation advice costs thousands...well I don't have thousands so I cannot get any useful advice nor can I take the risk of being drawn into further debt by someone seeking to take advantage of my situation. I am drowning. I tried to pm Bob but unfortunately haven't been able to get a conversation with him so even that invaluable lifeline is gone.


still thank you for giving your advice,
Sam

 

[which_08]

Massey,
I have to say you seem to ignore my words completely. First, I didn't empty my company bank account for the wedding and secondly if I had known what I was doing I wouldn't have ended up in this position. Before you continue with your judgmental insults please actually stop and read my words.

Hey sam I have had a read through this and not being on the forum for a long time it makes interesting reading. What I do want to add is yes you admit you have screwed up, and yes you admit you want to fix it. Your getting some great advice here and yes there are people and quite rightly voicing their opinions, I kinda get where your at because my first year trading i was in a mess with my accounts, it was only because i worked 20hrs a day i managed to get a team behind me to sort this but i was heading the same direction and i cant imagine how you must be feeling. Anyway getting back to why i quote your comments, you seem to be getting frustrated and my advice is this is the worst thing you can do, you will start thinking irational and making irational decisions. I feel you need to just take this as one hell of a learning lesson and pass your experience on to others. Concentrate on your family now and resolve this issue in peice, i really dont know where you stand but at least you cant be executed , thats a plus ha.

Take it easy !! You will be back on top in no time.

 

[Spongebob]

Tony,
I haven't been able to get any work since end of March. I am trying but my market is very depressed and there is just nothing out there. In terms of creditors there is only hmrc. I am extremely stressed, depressed, etc. I am not a serial company shutter. this is my only one.

what you seem to be stating is that in the circumstances I have described in this thread I bear all the responsibility for all company debts to hmrc, is that what you are saying? the limited liability counts for nothing and is all my liability?

I am confused by your term.dissolution. is this winding up? I guess I am at the point where I cannot see anyway of clearing what I owe to hmrc. I cannot currently get any money from my mortgage to put into the company. I don't have any other resources and feel numb. I have no where to turn next. I have been told on this forum that liquidation advice costs thousands...well I don't have thousands so I cannot get any useful advice nor can I take the risk of being drawn into further debt by someone seeking to take advantage of my situation. I am drowning. I tried to pm Bob but unfortunately haven't been able to get a conversation with him so even that invaluable lifeline is gone.


still thank you for giving your advice,
Sam

Sam,

It seems my inbox was full and so I haven't been receiving PM's. I've now emptied it so please PM me again and I'll give you a call.

Please stop worrying. Your position is nowhere near as bad as you fear. Ignore most of Tony's waffle; he displays more ignorance and pedancy with every long-winded post he makes.

If your company is insolvent and owes HMRC money they will eventually wind the company up and it will be liquidated by the Official Receiver. The protection of limited liability remains intact and the process will not cost you a penny other than your bus fare to the local OR office for an interview.

 

[northernant]

Hi pianosam,

Just to clarify as it is difficult writing a message rather than talking about it. Limited Liability still stands here and you will not be made personally liable for company debts providing there is no case for 'Wrongful Trading'. Effectively this just means irresponsible trading and mismanagement of an Insolvent company.

Now, if the HMRC wind the company up by forcing the company into liquidation the Official Receiver will get involved. One of the Official Receiver's jobs is to investigate the Directors on their running of the company but providing everything has been done properly you will be fine.

Dissolution is different to liquidation. Dissolution is where you apply at Companies House for the company in question to be Struck Off the register. This does not mean the problem has gone away as an unhappy creditor such as HMRC can apply for the company to be reinstated years after the 'Strike Off' and for £20k+ they probably would do this. Just to clarify that Dissolution would not be appropriate in this instance as the company is Insolvent. Your options are voluntary liquidation or inviting your creditors (HMRC) to wind you up (put the company into compulsory liquidation). If your cash-flow was better you could consider a Company Voluntary Arrangement.

Liquidation advice is usually free but the liquidation itself usually costs thousands.

Best regards,

Tony

 

[pianosam]

Bob
Thank you for making contact I have pm my number to you,
Many thanks,
Sam

 

[Jenni384]

H The form you have to fill out when processing a Dissolution is called a '652a' and on that form it clearly states that you are swearing by way of signature that the company is not Insolvent. So you see Dissolution really is not an option here. doing the right thing forst time is crucial.

Again with the 652a. As per a recent thread, the form is a DS01 and has been for some time. 652a is obsolete now. More importantly, you do not have to state the company is not insolvent. You have to state the company is not in insolvency proceedings, which is an entirely different thing. An insolvent company can apply for voluntary dissolution and a copy of the DS01 needs sending to every creditor, so they know the company is applying to be struck off, after which point they can object if they wish.

As others have stated, voluntary dissolution does not seem appropriate in Sam's case, but I wanted to correct this small but important point for the benefit of anyone else for whom voluntary dissolution may be appropriate.

 

[Spongebob]

Again with the 652a. As per a recent thread, the form is a DS01 and has been for some time. 652a is obsolete now. More importantly, you do not have to state the company is not insolvent. You have to state the company is not in insolvency proceedings, which is an entirely different thing. An insolvent company can apply for voluntary dissolution

Thank you for clearing this up Jenni, for those who might be misled by Northernant's rather poor advice regarding insolvency.

Am I alone in suspecting that 'Tony' is a rather keen but very junior clerk in a firm of insolvency ambulance chasers out to make a name for himself?

Liquidation advice is usually free but the liquidation itself usually costs thousands.

Best regards,

Tony

A classic example of bad advice which it would be very expensive blindly to follow.

Liquidation can indeed be free, as any reputable insolvency practitioner will admit. Compulsory liquidation through the Official Receiver costs nothing and is perfectly suited to many small insolvent companies. I spend a fair amount of my time on here advising desperate people how to go about it.

IP's don't like this, and firms of pseudo IP's like Tony's hate it however, because they earn no fees!

 

[pianosam]

Bob,
I have sent you my details in a pm...are you still having mail problems? I am meeting with my accountant Tuesday this week to discuss my options (as much as I understand them...) and your thoughts, if at all possible, would be hugely appreciated. So sorry to hassle you with MY issues but anything you can offer would be a hundred times more use than where I am today,

Many thanks for thinking on my issues,
Sam