DS01 Submitted then objected to by HMRC.

[Counrty monkey]

Hello all,

I am in need of some advice on the following.

Following a disasterous year I stopped using my Ltd company in March 2013, it has had no activity, no invoicing and no money in the account since then. I have no directors loans, company vechiles or company assets of any kind and never have had. The Ltd company is not registered to my home address and is now lying dormant and unused.
So,
I submitted a DS01 and followed the Spongebob plan and have just heard back from HMRC (sent to my home address not the buisness address) that they object to the striking off as there are Corporation Tax liabilites. Since then i have also recvied a letter from Rosendales, a debt collection agency (again to my home address and not the buisness address) demanding payment in full of all corporation tax liabilites within 7 days.

My question is this,

What do i do now?

Do i resubmit a DS-01? Are HMRC going to reject this as well?

Do the debt collectors have any powers at my home address?

If they turn up then what course of action do you suggest?

Is this just scare tactics by HMRC?

Any other advice from anyone who has experienced similar?

To say this has got me worried is an understaement so any possible help would be very greatly appreciated.

Regards
J

 

[StevensOnln1]

Debt collectors have no right to force entry to your home or take your personal possessions. If they do turn up tell the the company has ceased trading and has no funds.

You can apply for strike off again 3 months after you first applied. It may take a few goes but eventually either the strike off will go through or HMRC will put the company in to liquidation. If you don't have an overdrawn directors loan you have nothing to worry about.

 

[Scalloway]

Companies House will only put up with HMRC objecting for so long before they dissolve the company.

 

[Spongebob]

Debt collectors have no right to force entry to your home or take your personal possessions. If they do turn up tell the the company has ceased trading and has no funds.

You can apply for strike off again 3 months after you first applied. It may take a few goes but eventually either the strike off will go through or HMRC will put the company in to liquidation. If you don't have an overdrawn directors loan you have nothing to worry about.

Exactly right.

Everything is going according to plan. You might want to send an adapted version of the Spongebob letter to Rossendales explaining the situation. It is then unlikely that you will hear from them again.

Ultimately HMRC have two choices; either wind the company up or let it be struck off. As you have no overdrawn DLA it makes no difference whatsoever which choice they make.

Leave the ball in their court and get on with your life.

 

[10032012]

I think your home is safe, and despite HMRC like flexing their muscles as the authority the most likely reason they send to your director address is, if the company stopped trading and previously rented an office or hired a virtual office address its almost fully probable that you can no longer be reached by it.

Did you send the spongebob letter to HMRC?

 

[Paul_Rosser]

May be a silly question, but if you have Corporation Tax liabilities then this means you made a profit, so where did the money go?

 

[Spongebob]

May be a silly question, but if you have Corporation Tax liabilities then this means you made a profit, so where did the money go?

Funding the following year's losses?

 

[10032012]

May be a silly question, but if you have Corporation Tax liabilities then this means you made a profit, so where did the money go?

You do not pay tax at the company year end. Usually 9 months + 1 day later.

 

[Spongebob]

You do not pay tax at the company year end. Usually 9 months + 1 day later.

Exactly.

Plenty of time for any money set aside to pay the tax to have been eaten up keeping a company afloat in the event of a sudden downturn.

 

[10032012]

Indeed Spongebob, I see it rather wrong that HMRC expects a very small business to set aside its tax bill for almost a year. (9 months is getting pretty close)

Most if not every very small business has cash flow issues, it doesn't matter if your bank has given you a tax saver account, when times get hard with cash flow, its that piggy bank you go to raid!

If you have a seasonal business this could be even more difficult and this same problem happened to me a few years back.... used the money for cashflow*, had a worse than expected year as of the recession, couldn't pay the tax bill on Jan 1st... took two months plus interest to cover it. Got there in the end though!

(* around 8 months of the year business ticks over with small income, but 3 months with large income, and 1 month with almost non existing income. The good 3 month profits can easily cover the tax liability several fold. This income didn't happen that year (slightly better than the 8 months income) and December is the non-existing revenue month which made things a lot worse!)

Does anyone know if HMRC reveals how much money each year gets owed to HMRC by very small businesses that end up spending the tax?

 

[Paul_Rosser]

Funding the following year's losses?

If they did make a loss in the subsequent year then this could have been carried back to the previous year to wipe out any CT liabilites.

 

[Paul_Rosser]

You do not pay tax at the company year end. Usually 9 months + 1 day later.

yes thats pretty standard accounting stuff, doesn't answer the question of where the profit actually went.

If it was used to fund the company which made a loss in the next trading year, then personally I would shorten the companies year and carry the loss back to ensure that within 12 months of the original period ending everything was all tied up.

 

[Paul_Rosser]

Indeed Spongebob, I see it rather wrong that HMRC expects a very small business to set aside its tax bill for almost a year. (9 months is getting pretty close)

The HMRC don't expect you to set aside your tax for 9 months and a day, they allow you this time to pay it as most companies take at least a few months getting their accounts finalised after a period ends.

You can pay your CT on account any time you like and in an ideal world all companies would pay their CT long before the deadline.

You get 12 months from a period ended to actually submit your tax return (CT600) so the payment after 9 months is only a guess if you haven't done your tax calculation, but if you get it wrong you may be asked to pay interest.

And lets please remember in order for a company to have a CT liability they must have made a profit which seems pretty fair to me.

All business owners should be aware they will have to pay Corporation Tax and so when the money comes in during the year account for it, sadly far too many don't and rely on the next years money to cover last years Corporation Tax.

 

[Spongebob]

If they did make a loss in the subsequent year then this could have been carried back to the previous year to wipe out any CT liabilites.

True enough, but a company can become insolvent long before the accounts are prepared for the 'subsequent year'. It could well be in the OP's case that a good accountant could wipe out the CT liability using the subsequent losses, but who is going to pay the accountant to do this work? In all probability it will never be done.

The reality is that a company can go from profitability to insolvency very quickly, particularly if the income stream takes a big hit.

 

[Paul_Rosser]

True enough, but a company can become insolvent long before the accounts are prepared for the 'subsequent year'. It could well be in the OP's case that a good accountant could wipe out the CT liability using the subsequent losses, but who is going to pay the accountant to do this work? In all probability it will never be done.

The reality is that a company can go from profitability to insolvency very quickly, particularly if the income stream takes a big hit.

It can but any decent business owner should accept this kind of thing happens and make provision for it prior to spending the previous years Corporation Tax money and have provision for when their available money is reduced to just enough to pay an accountant £500 a close the year as it stands and move the loss back.

 

[Paul_Rosser]

Sadly the system is what it is and it's far too easy for someone to setup a company not understanding how Corporation Tax etc. works (or to just not care), run the company badly and walk away claiming it's not their fault.

Yes some companies have what others would call "bad luck" but in most cases it's either the fault of someone not realising the industry they are in can be like that or not having a backup plan should the worst happen as it often does in business.

 

[Spongebob]

Unfortunately entrepreneurship and being a good manager are very rarely found in the same person. Entrepreneurs are vital to society but generally are risk-takers who fly by the seats of their pants without too much respect for accounting conventions or even the law! Needless to say they fail as often as they succeed.

On the other hand I suspect that you Paul, are a very good manager!

 

[Paul_Rosser]

Unfortunately entrepreneurship and being a good manager are very rarely found in the same person. Entrepreneurs are vital to society but generally are risk-takers who fly by the seat of their pants without too much respect for accounting conventions or even the law! Needless to say they fail as often as they succeed.

On the other hand I suspect that you Paul, are a very good manager!

I'm actually quite good at both and would say I'm more of an entrepreneur than a manager, but understand keeping good records etc. are important to some people (like the HMRC) so have someone to do that for me whilst I'm off taking chances ;-)

Also don't believe in failure, the result will be what it is based on a number of factors, if it's not the result you expected then learn from it, change some factors and give it another go.

 

[10032012]

True enough, but a company can become insolvent long before the accounts are prepared for the 'subsequent year'. It could well be in the OP's case that a good accountant could wipe out the CT liability using the subsequent losses, but who is going to pay the accountant to do this work? In all probability it will never be done.

The reality is that a company can go from profitability to insolvency very quickly, particularly if the income stream takes a big hit.

That was the point I was making.

 

[Alan R Price]

Although it keeps me in business, it is far too easy to set up a company and gain the protection of limited liability. Don't get me wrong, I completely believe in the concept but I would like to see the equivalent of a driving test for directors and a minimum level of investment to allow people the privilege of the protection of limited liability. This would help prevent companies becoming insolvent as a result of a fairly small blip in performance, which happens all too frequently.

 

[Spongebob]

I think that this is largely a problem of the previous government's making, in that they actively encouraged very small businesses such as IT contractors and tradesmen to incorporate rather than to continue as sole traders. Accountants have pushed the tax-efficiency of incorporation without warning of the additional responsibilities it entails.

The number of new companies formed over the last ten years has been phenominal.

 

[Paul_Rosser]

Personally I would go with no limited protection for the first say 1-2 years and then once you have proven you can be trusted to run a limited liabilty company, then you can move to limited status.

 

[Spongebob]

Personally I would go with no limited protection for the first say 1-2 years and then once you have proven you can be trusted to run a limited liabilty company, then you can move to limited status.

Ain't going to happen.

All it needs is to remove the perceived tax advantages of incorporation for one-man band businesses.

Currently very few companies are set up for the advantages of limited liability; it is driven by accountants selling the benefits of the low salary/dividends trick. End that and most smal businesses would start as sole traders or partnerships like they always used to, incorporating only after they were up and running and looking to expand.

 

[Paul_Rosser]

They aren't perceived lots of HMRC schemes only apply to incorporated companies like the patent box or R&D.

Limited companies are also useful when 2 or more people want to go into business together, but as Alan said it's far too easy for people to walk away from the mess they created due to the limited status of the entity.

But the system is what it is and can't see it changing any time soon.

 

[10032012]

Pros and Cons.

Limited Liability is just that but don't forget other legit advantages such as being able to raise equity by private investment with ownership share (you cant really do that as a sole trader!!) and even transparency (such as publishing consolidated accounts, official register etc.)

Limited Companies are not as lucrative as everyone appear to assume. How many times do you have to give a personal guarantee when entering in agreements (finance, leases etc.)? How many times do you have to give details of all directors and significant shareholders (i.e. 10%+ usually) when opening trade accounts etc? How much more vulnerable do you become due to fraud and even junk mail from being on the companies register?

This whole own separate entity means very little in the 21st century. No more ferraris at the expense of the bank. Everything has been tightened up. Whereas hiding behind the word "we" can have many advantages from reducing your own personal liability there is actually liability from being a director (even a shadow director - shareholder - so much for being limited to the value of your shares) stronger than ever before. It rarely happens but the corporate veil can be pierced.

Despite being a limited company and regardless of the age and reputation, hardly anyone will do business directly in the name of the company without due diligence on the company officers in addition to that of the company.

Banks aren't stupid - personal guarantees, matched funding and card holders (i.e. its not your company's debit/credit card, its yours, despite it being the account in the name of the company). Insurance companies aren't stupid, in addition to asking about the company they ask about the directors. People are more interested in your credit rating score than the companies history.

Seems HMRC are still a little behind allowing someone to spend last years tax bill and be somewhat powerless to do anything about it. Of course, if they can prove there was malice then they will prosecute you for it, otherwise it gets written off. This said its similar with Companies House fines, if they strike the company off there is no money to pay.

I always found it interesting about pay minimum salary and dividends... accountants normally forget to say that this method can screw you over with mortgages etc when your income appears too low. Anyone who don't understand will then think you either cannot afford it or doing some tax evasion scheme.

 

[10032012]

Just like gov.uk that is written more for aliens than UK citizens... its all about statistics... stats have always been made up by number of companies registering or deregistering for VAT and the limited company registration counts makes things look promising.

After all one can understand the need to make a trading company dormant with intent to trade again some time in future, or to go dormant for the first year... but the number of always-been-dormant companies doesn't do anything other than boost numbers, IMO Companies House should strike off always-been-dormant companies after 3 years.... but its a nice little earner for them.

They think we will take over Germany as Europe economic leader in 16 years... haha

 

[Paul_Rosser]

I always found it interesting about pay minimum salary and dividends... accountants normally forget to say that this method can screw you over with mortgages etc when your income appears too low. Anyone who don't understand will then think you either cannot afford it or doing some tax evasion scheme.

We had to get a mortgage recently and most banks will accept dividend payments as part of your monthly income, however it's a lot harder to prove as they usually want to see 3 years worth of company accounts.

 

[Alan R Price]

I don't think there should be a minimum period of trading before a business can become limited as long as there is somebody at the helm who has a good track record or has passed the test I referred to above. But I do think there should be a requirement for minimum cash investment of £10,000 of share capital at the outset, with a limit on how much directors can draw out in the first three months of trading.

 

[Paul_Rosser]

Like the £10k minimum investment idea, would certainly reduce the number of limited companies being formed as a lot are formed with very limited funds so would force people to become a sole trader first and them move to limited once they had 10k to invest.

 

[Alan R Price]

Either that or they would have to make a serious financial commitment at the outset, either by remortgaging, using savings or obtaining independent investment.

 

[RightCharlie]

Hello all,

I am in need of some advice on the following.

Following a disasterous year I stopped using my Ltd company in March 2013, it has had no activity, no invoicing and no money in the account since then. I have no directors loans, company vechiles or company assets of any kind and never have had. The Ltd company is not registered to my home address and is now lying dormant and unused.
So,
I submitted a DS01 and followed the Spongebob plan and have just heard back from HMRC (sent to my home address not the buisness address) that they object to the striking off as there are Corporation Tax liabilites. Since then i have also recvied a letter from Rosendales, a debt collection agency (again to my home address and not the buisness address) demanding payment in full of all corporation tax liabilites within 7 days.

My question is this,

What do i do now?

Do i resubmit a DS-01? Are HMRC going to reject this as well?

Do the debt collectors have any powers at my home address?

If they turn up then what course of action do you suggest?

Is this just scare tactics by HMRC?

Any other advice from anyone who has experienced similar?

To say this has got me worried is an understaement so any possible help would be very greatly appreciated.

Regards
J

Hi, Just wondering where I can get hold of the Spongebob plan or letter as am in similar situation as above. Thanks

 

[Paul_Rosser]

Hi, Just wondering where I can get hold of the Spongebob plan or letter as am in similar situation as above. Thanks

Try this thread -
http://www.ukbusinessforums.co.uk/t...ich-to-pay-an-insolvency-practitioner.316523/

 

[RightCharlie]

True enough, but a company can become insolvent long before the accounts are prepared for the 'subsequent year'. It could well be in the OP's case that a good accountant could wipe out the CT liability using the subsequent losses, but who is going to pay the accountant to do this work? In all probability it will never be done.

The reality is that a company can go from profitability to insolvency very quickly, particularly if the income stream takes a big hit.

Hi Spongebob, where can i get a copy of your Plan? or the sample letter you talk about? Thanks

 

[Spongebob]

Hi Spongebob, where can i get a copy of your Plan? or the sample letter you talk about? Thanks

The Spongebob Plan is outlined in a sticky thread on the Insolvency Forum.

http://www.ukbusinessforums.co.uk/t...ich-to-pay-an-insolvency-practitioner.316523/