Hassled by Haslers ! asking for 27K, help needed please.

[keeno65]

Hi Guys, I will try to keep a fairly long story as short as I can, I will answer any in depth questions willingly if somebody can help me.
I am a structural designer in shipbuilding, in Dec 2009 I finished a contract in the UK with my Ltd Co. The only work I could get after was in Holland, however I couldn’t use my ltd co there, so I was working in the dutch tax system, my company was just left. At the time I was also struggling financially (personally), I had a lot of credit card debts and I was just managing to keep my head above water by making the minimum payment every month to them, so I was never behind but I wasn’t getting any closer to paying them off. I also owed corporation tax from my previous year and when the accounts were done for 2009-10, I owed a total of appx 19K in corporation tax.
PAYE and VAT were all paid up to date, so I only owed CT. I made a deal with HMRC and was paying approx. £150 pm (from my personal earnings in Holland), I made these payments from May 2010 until June 2011. I was still working in Holland and the stress of all the money I owed was really getting to me, although I was never behind with payments, I knew I wasn’t getting anywhere and I would be paying all my life so I thought I have got to do something about this. I called the CCCS debt charity line (now stepchange) and asked for help, they came up with a plan for me and contacted all my creditors (still talking personal now) I owed approx. 40K, anyway when I was going through everything with them I also told them about the 19K CT I owed, they said that was not personal and I needed to call the business debt line, which I did.
Ok, this was now July 2011, I was still working in Holland, the BDL asked me when I last traded and I told them Dec 2009, there advice was to apply for a strike off using form DS01, I asked what about the CT and they said forget it, it is highly unlikely the HMRC will chase it up (?) they also told me to write a letter to HMRC that my ltd company was technically insolvent , it has ceased trading and that I was applying for a strike off, which I did, I also stopped the monthly payments to HMRC.
I never heard anything after for months, in fact the next thing I heard was from the Official Receivers approx. July 2012 telling me I had to go to their offices for an interview. I went to the interview and after a couple of hours of interrogation, explaining how it had all gone wrong they said the interview was over, I asked what would happen now. The OR said that the best outcome would be that I never heard from then again, and the worst outcome that I could be found guilty of (something) and I would not be able to be a director again and I may need to pay back the CT personally.
Anyway I never heard anymore, from nobody, until Sept 2014 when I received a letter from an accountants called HASLERS (very apt) including a questionnaire that I had to fill in and send back, all under section 235 of the insolvency act 1986 saying I had a duty to do so. I called the BDL again asking what I should do, and they advised to fill it in and send it back, which I did in August 2014. Again I never heard anymore , until a couple of weeks ago, March 2015.
A letter from Haslers saying (very condensed) that during the period of trading I had made dividend payments notwithstanding that the companys distributable reserves available for the purpose were not sufficient for such payments to be made. It says that by allowing the payments I acted in breach of my duties as a director, and Haslers are entitled to take action against me pursuant to the provisions of, inter alia, s.212 of the insolvency act 1986. For the avoidance of doubt , pursuant to these provisions I am claiming a total of £26,845 being the amount by which the dividends paid exceeded distributable reserves according to the information on the trial balance to 31 March 2011.
They then say they want a proposal from me on how I am going to repay the balance to the company? ( I am still on my DMP that I set up in July 2011)
Now, there may be some things I have missed, all my paperwork is in UK and I am in Holland again, but back home tomorrow. But that is the meat of it.
What are my options here? How did I start off owing 19K to HMRC and now Haslers want 27K off me, with no mention of HMRC.
Any help would be greatly received and thank you for reading all of this.
Many thanks,
Mark

 

[Paul_Rosser]

Ok so in a nutshell Haslers have looked at the company accounts and determined that you took £27k out of the company which you shouldn't have as there was not enough profit to allow for dividend payments and they would like this to cover the companies outstanding debts.

First step would be to clarify what the funds will be used for as the HMRC debt may now include fines and potentially Haslers fees for dealing with the insolvency.

Then in reality if you did take this money out of the company you would need to repay it or look at bankruptcy yourself.

With Alan R Price still used UKBF as this one would be right up his street :-(

 

[UK Contractor Accountant]

Need more information to offer any meaningful advice.

1. What was the last financial accounts prepared for the company?
2. Was the trial balance at 31 March 11 complete and reconciled?
3. What advice, if any, did your Accountant at the time give you regarding dividend payments made.
4. Were the dividend payments supported by relevant paperwork e.g board minutes, vouchers, management accounts.

 

[Chris Ashdown]

When you make dividend payments you must be able to prove that the company was in profit at the time, with enough to cover both the dividend and any taxes due.

Many new companies are advised to take a maximum tax free monthly salary and make pay up by monthly or similar Dividends which is fine if the company is always in profit, but any loss of profit can lead to problems and make all dividend payments repayable to the company. this sound like what may have happened to you

 

[Lisa Thomas]

Hi Keano - What has happened is that the company was placed into Compulaory Liquidaiton. The Official Receiver was apointed Liquidator initially and then the appointment was passed to Haslers who are now the Liquidators. They have a duty to investigate what happened prior to Liquidation. The company's debt to HMRC and the monies that Hasler have asked you to repay are two different things. As per advice given above Hasler are no doubt claiming that you took this money out of the company at a time when there weren't enough reserves to do so and the company was insolvent. They can therefore pursue you for misfesance if they can prove this. On the assumption their claim is valid and you can't reach a repayment settlement with them they could obtain a Court Order and force you into Bankruptcy. I suggest you seek urgent advice from a local Insolvency Practitioner or solicitor that specialises in insolvency. Most decent IP firms will offer you a free initial meeting. Failing which you will need to prove your personal financial position to Haslers and reach a deal.

 

[keeno65]

Thanks for you answers, one thing I don't understand is if the CT I owe is based on the amount of dividends I took, then if I have taken too many dividends and have to repay them, would that not reduce the amount of CT owed?
I am in the process of gathering some of the other info asked for. Would it be worth me talking to the business debt line again, as it is on the basis of their advice that I took the course of action I did?

Lisa, can you recommend an IP firm in my area (Wirral) ?

 

[Lisa Thomas]

Hi - I don't know any IP firms personally in that neck of the woods but there are 5 or 6 to choose from on Google. (Sorry - I can't send you the link as apparently I haven't posted enough posts yet being a new member...!)

 

[keeno65]

I do have abbreviated accounts for March 2010, (I never traded again after Dec 2009 anyway)
One of the sections, transactions with directors, say total dividends paid to directors in the period was £18,662 (prior period £27,248)

 

[keeno65]

Ok, thanks Lisa

 

[UK Contractor Accountant]

Who produced this trial balance as at 31 March 11 that Halers refer to?

They are basing their claim for repyament of £26,845 on the figures shown on this trial balance. In order to defend/reduce the claim you are your advisors are going to have the prove that the trial balance is not complete and accruate.

If you have been paying back Corporation tax from personal funds this will need to adjusted on the trial balance right upo to the date yoiu ceased paying them.

 

[Walkol]

Thanks for you answers, one thing I don't understand is if the CT I owe is based on the amount of dividends I took, then if I have taken too many dividends and have to repay them, would that not reduce the amount of CT owed?

No.

Dividends are (or should be!) an allocation of POST tax profits. They do not effect CT at all.

Echo the statements so far, seek a meeting with an IP to discuss options.

 

[Insolvencyexpert]

I agree, go and see an insolvency practitioner - you need to be aware than bankruptcy will require you to give up all and any assets you have house etc, but you will be discharged from your debts. Good luck. If you want any recommended IPs you can mail me.