HELP!!! I can't afford to pay corporation tax and want to close my limited company

[Jamessmith17]

Hello everyone- I would be so very grateful if anyone can help me with the below.

To keep it brief- I opened my limited company in healthcare 3 years ago and was the sole director. I had employed a company secretary also. The company address was at my home address which I own and pay a mortgage for.

Main issue is- I have been struggling paying my corporation tax and self assessment tax for the last 2 years but I have managed to play catch up but it has always had a knock of effect for the following year. I have £17000 corporation tax due end of march 2017. I am planning to stop using the limited company now. I understand next years corporation tax will be around 15k so in essence I owe over 30k in corporation tax which I can simply now not afford.

I also believe I owe the limited company 24k as overspends.

I am looking to get a job that pays PAYE into my personal account from April onwards but don't know what do to with all the debt in the business. I am worried given the business address was my home address whether my home is at risk. I cannot simply afford this debt and given that I have no intention of opening another limited company in the immediate future I was wandering what you would think would be the best option to rid me of this debt? I would be so very grateful for your replies. Many thanks

James

 

[Scalloway]

As you owe the limited company money HMRC will not be keen to let you dissolve the company. You are unlikely to lose your house but HMRC may charge you tax on the money you owe the company.

 

[Lisa Thomas]

If liquidated the liquidator will pursue you for the debt and this could result in a charge over the Home or bankruptcy, which could result in repossession in a worst case scenario.

You need to speak to an IP for advice.

A friendly one might allow you time to repay some/all of the debt over time, depending on your circumstances.

 

[Gavin Bates]

I agree with Lisa you need to take advice as you may have both corporate and personal insolvency issues to manage.

 

[UK Contractor Accountant]

We all would like to rid ourselves of debt but it is not as easy as just walking away from the company and hope nobody comes knocking at the door for the taxes owed.

You owe the company £24K where you have have taken out money from the company which was earmarked for HMRC to pay Corporation Tax.

You need to take the bull by the horns by either attempting to dissolve the company yourself or appoint an IP to liquidate the company and negotiate repayment plan for repayment of your debt.

Please note any debt sums owed that get wiped out on dissolution or by negotiation with an IP counts as income requiring disclosure on your personal Tax Return. This may cause a personal tax issue which you will have to deal with.

 

[Pish_Pash]

This - on paper - sounds like a great operating model...open a limited company spend the corporation tax owing on oneself...then say "I can't pay the corporation tax & wish to close the company" - rinse repeat.

 

[Gavin Bates]

James

I just thought for the purpose of this blog I would comment on a couple of the recent replies. Whilst UK Contractor is completely correct in his comments about the tax issues, I think Pish Pash has been very judgemental.

I have been an insolvency practitioner for 27 years and during that time people have said to me 'so you deal with doggy directors then'. The truth is there have been a few, but I would say that 95% or more, are people who tried a business and for various reasons, it failed.

Sometimes it is a lack of financial knowledge or planning, sometimes it is bad luck (change of markets, bad debts etc). The truth is the average director is an optimist (otherwise they would be an employee) and we need as many of these as possible.

I am sure James falls into this category, it appears this is his first Company and like many on this forum is looking for help and assistance to try and deal with a difficult position.

As mentioned above but me and Lisa, I think he needs to sit down with an IP to work through the issues.

Gavin

 

[Ian J]

Whilst UK Contractor is completely correct in his comments about the tax issues, I think Pish Pash has been very judgemental.

Pish Pash may have been judgemental but the fact is that according to the OP's figures he owes £30,000 Corporation Tax covering the first two years' trading. This implies that the company made profits for the two years of approximately £150,000 yet this money has now vanished.

 

[nelioneil]

James

I just thought for the purpose of this blog I would comment on a couple of the recent replies. Whilst UK Contractor is completely correct in his comments about the tax issues, I think Pish Pash has been very judgemental.

I have been an insolvency practitioner for 27 years and during that time people have said to me 'so you deal with doggy directors then'. The truth is there have been a few, but I would say that 95% or more, are people who tried a business and for various reasons, it failed.

Sometimes it is a lack of financial knowledge or planning, sometimes it is bad luck (change of markets, bad debts etc). The truth is the average director is an optimist (otherwise they would be an employee) and we need as many of these as possible.

I am sure James falls into this category, it appears this is his first Company and like many on this forum is looking for help and assistance to try and deal with a difficult position.

As mentioned above but me and Lisa, I think he needs to sit down with an IP to work through the issues.

Gavin

I think Pish Pash is not trying to imply there are alot of dodgy directors out there. But there are far too many who lack the knowledge and understanding of what a limited company is, and how to account for money in and out of the business. Bad luck does certainly come
into it, and I genuinely sympathise with those where a business is struggling due to markets, lack of demand etc...People don't want to see businesses fail - entrepreneurship is good and so is competition for customers.

But we have seen all too often here people who have taken out far too much and not providing enough for tax/vat and treated the company profits like a sole trader treats their profits.That is down to a lack of knowledge or lack of advice from accountants.