I can't pay vat owed

[Ambi Singh]

Hi I'm the director of a ltd company and I need some help and advice on winding up my company
I've ran up a vat debt and can't pay I've got a vat inspector on my case
The company is going to be struck off by companies house but the vat guy is aware of this and has threatened to make a objection
I own my own house and am worried hmrc will take this off me
The debt is 19856
I have just been using the vat paid to me we can call it mismanagement as this is my First registered company
Can someone please advice me I'm really really stressed

 

[WaveJumper]

Sorry I know this is not what you want to hear but I just don't understand people who set up a company become VAT registered, collect 20% tax on behalf of the government and some how think they can spend it when technically its not their money. The figure sounds quite high so you must have had quite a high turnover too, yes mismanagement. I am sure others will give you a steer on the options open to you.

 

[simon field]

Sell your house, pay what you owe, and downsize.

 

[Mr D]

HMRC pretty much will object to business strike off.
And chase for the money.

Possible they will go for winding up - where they get your conduct investigated. I have heard of instances with only a bit higher debt to HMRC wound up.

 

[Mr D]

Sell your house, pay what you owe, and downsize.

Not necessary at this point. He doesn't owe the VAT debt yet. The company does.

 

[JEREMY HAWKE]

Has the money been used for your income or just used in other areas of the company ?

Furthermore it is very bad advice for the usual suspects on here to just say its your fault sell your house ! .
You know the law and company legislation so don't give the wrong advice just because the OP has wound you up !

 

[stugster]

How much is the debt?
Are you the sole director?
Is winding up your only option?
Have you discussed payment plans with HMRC?

 

[Ambi Singh]

Sorry I know this is not what you want to hear but I just don't understand people who set up a company become VAT registered, collect 20% tax on behalf of the government and some how think they can spend it when technically its not their money. The figure sounds quite high so you must have had quite a high turnover too, yes mismanagement. I am sure others will give you a steer on the options open to you.

Has the money been used for your income or just used in other areas of the company ?

Furthermore it is very bad advice for the usual suspects on here to just say its your fault sell your house ! .
You know the law and company legislation so don't give the wrong advice just because the OP has wound you up !

the debt is 19000 I was deterred from asking for a payment plan as I can afford 100 pw but the vat guy was horrified at my proposal

 

[Mr D]

the debt is 19000 I was deterred from asking for a payment plan as I can afford 100 pw but the vat guy was horrified at my proposal

Yes I imagine he would be.
Almost 4 years to clear the debt.

HMRC appear to prefer clearing debts in 12 months or less.

 

[fisicx]

the debt is 19000 I was deterred from asking for a payment plan as I can afford 100 pw but the vat guy was horrified at my proposal

So where has the money gone? It was never yours to spend in the first place. Which is why they are chasing you for the debt.

 

[Annoying Donkey]

Does that figure include penalties...? Penalties can easily more than double the debt.

About 20 years ago I spent tax and VAT money to keep my company afloat while I was ill. I somehow thought I would miraculously recover and go back to work.

Company was eventually struck off by Companies House, and resurrected by HMRC. I was subject to an investigation by the Official Receiver. I was found to be innocent of any wrongdoing, even though I had use the tax and VAT money that wasn't company money. There was no mention as to whether I was innocent of stupidity No further action was taken against me...

The result will likely depend on what you did with the VAT money. If it went to you in some form, then it's likely they may well find fault and seek to recover. If it was spent purely on company expenses. then likely not.

It's also likely that this process will take some time, so put aside your £100/wk in a separate account and if it comes down to it, you can make an offer to the Court of lump sum plus monthly payment.

If no further action is taken, then you'll have a bonus sum put aside.

Oh, and next time, put the VAT money aside (and indeed an allowance for taxes) in a separate account.

 

[stugster]

It's also likely that this process will take some time, so put aside your £100/wk in a separate account and if it comes down to it, you can make an offer to the Court of lump sum plus monthly payment.

This is very sage advice.

 

[Mark T Jones]

It would be interesting to know where the VAT money has gone in order to give sensible pointers.

If it has just been swallowed in running costs, then you clearly don't have a viable business so need to move on.

If, on the other hands, you blew it on whores & drugs, there may well be a business, so it's worth looking at repayment options.

Beyond that, on the face of it your home isn't at risk, unless there is an overdrawn DLA or an investigation finds you personally liable (statistically low chance)

 

[Ambi Singh]

So where has the money gone? It was never yours to spend in the first place. Which is why they are chasing you for the debt.

It would be interesting to know where the VAT money has gone in order to give sensible pointers.

If it has just been swallowed in running costs, then you clearly don't have a viable business so need to move on.

If, on the other hands, you blew it on whores & drugs, there may well be a business, so it's worth looking at repayment options.

Beyond that, on the face of it your home isn't at risk, unless there is an overdrawn DLA or an investigation finds you personally liable (statistically low chance)

hi the money went on paying myself as I couldn't work due to being ill
I classed it as mismanagement I am really in a dark place at the moment
And I don't know what to do

 

[JEREMY HAWKE]

hi the money went on paying myself as I couldn't work due to being ill
I classed it as mismanagement I am really in a dark place at the moment
And I don't know what to do

That's a problem and I was hoping you were going to say it was used in the company !

 

[Mr D]

hi the money went on paying myself as I couldn't work due to being ill
I classed it as mismanagement I am really in a dark place at the moment
And I don't know what to do

At the moment the company owes the money.
Unless that changes in the future then you personally do not owe HMRC for that money.

However if you had an overdrawn directors loan account then that is personal income or a debt to the company which can be chased if the company is wound up.

 

[Herbs]

Over what period did you use that money to pay yourself?

If its a year then £20k isn't so bad as it's bare minimum, if it's 2 months on the other hand I would expect them to take a dim view......

 

[simon field]

Not necessary at this point. He doesn't owe the VAT debt yet. The company does.

I didn't say he did. But doing that would avoid everybody else having to bail him out wouldn't it.

 

[Newchodge]

hi the money went on paying myself as I couldn't work due to being ill
I classed it as mismanagement I am really in a dark place at the moment
And I don't know what to do

Did you pay yourself via payroll or via a director's loan?

 

[Pish_Pash]

I didn't say he did. But doing that would avoid everybody else having to bail him out wouldn't it.

Also...he's ponied up our money - we'd all like it back.

 

[Maxwell83]

hi the money went on paying myself as I couldn't work due to being ill
I classed it as mismanagement I am really in a dark place at the moment
And I don't know what to do

Okay, that's not good. BUT, are you better now? If so, are you back in the business making money again? If the business is viable, consider trading through it - £400 p/w should satisfy the repayment plan - any chance you could do that when trading at full speed?

 

[Lisa Thomas]

You should take advice from an IP.

HMRC cannot go after your personal assets for a Company debt unless you have committed fraud.

If your 'paying yourself' did not go through payroll and get taxed then it is likely to be a Directors Loan account due to the Company - you will therefore be a debtor.

If HMRC Liquidate the Company, the Liquidate will investigate this and will look to you for repayment of the DLA. This can then include proceeds against you and your house could be at risk - not because the Company owes HMRC but because you will owe the Company money.

 

[kulture]

Most of all do not worry. The debt is not yours to pay at the moment. No-one can take your house away from you yet. If the company is struck off then the debt dies with it. HMRC MAY apply for the company to be resurrected, but they probably will not. What is more likely is the HMRC objects to it being struck off and it is not. Then they must either wind the company off, in which case the money situation is investigated, or they do nothing and the company is eventually struck off.
When they investigate the money situation they may well decide that the money was a Directors Loan and has to be paid back to the company. This is when you agree a re-payment schedule with the Official Receiver, NOT the VAT inspector.
This could take years. It may not get this far. Stop worrying. By all means start saving so that if it comes to it you have something to pay.

 

[Mr D]

I didn't say he did. But doing that would avoid everybody else having to bail him out wouldn't it.

So far what we know is that the company owes the debt.
Him paying the company debt personally is nice and all but not yet legally required.

 

[Mr D]

Also...he's ponied up our money - we'd all like it back.

Bit like Mastercard?

Who if they pay it back will look to make some money to pay it back with... and who do they charge?

 

[Ambi Singh]

Okay, that's not good. BUT, are you better now? If so, are you back in the business making money again? If the business is viable, consider trading through it - £400 p/w should satisfy the repayment plan - any chance you could do that when trading at full speed?

No chance I'm afraid I have a offer from someone who is willing to take the business on including the debt can I resign as the director and give the business up is that a option

 

[Ambi Singh]

Most of all do not worry. The debt is not yours to pay at the moment. No-one can take your house away from you yet. If the company is struck off then the debt dies with it. HMRC MAY apply for the company to be resurrected, but they probably will not. What is more likely is the HMRC objects to it being struck off and it is not. Then they must either wind the company off, in which case the money situation is investigated, or they do nothing and the company is eventually struck off.
When they investigate the money situation they may well decide that the money was a Directors Loan and has to be paid back to the company. This is when you agree a re-payment schedule with the Official Receiver, NOT the VAT inspector.
This could take years. It may not get this far. Stop worrying. By all means start saving so that if it comes to it you have something to pay.

Hi thanks for your advice it made me feel a little better I just wanted to know if it is possible to resign as a director as I have had a offer to take on the business with the debt

 

[Pish_Pash]

Bit like Mastercard?

Who if they pay it back will look to make some money to pay it back with... and who do they charge?

The difference being ...you have a choice whether you give Mastercard your custom (& therefore it's your choice whether you chip in wrt to the claw back costs)...not so with HMRC.

 

[Mr D]

The difference being ...you have a choice whether you give Mastercard your custom (& therefore it's your choice whether you chip in wrt to the claw back costs)...not so with HMRC.

Brits living and working overseas and not dealing with HMRC appear to have made a different choice.

No reason someone must deal with HMRC if they really want to avoid them. Come to think of it, little old lady next door to me probably does not deal with HMRC any more.

 

[Mr D]

No chance I'm afraid I have a offer from someone who is willing to take the business on including the debt can I resign as the director and give the business up is that a option

By that you mean sell them the business?

 

[Alan]

Hi thanks for your advice it made me feel a little better I just wanted to know if it is possible to resign as a director as I have had a offer to take on the business with the debt

Of course you can resign as a director and sell them the business - sounds like you have a way out

 

[Ambi Singh]

By that you mean sell them the business?

Yes they are willing to take the debt on for the business

 

[ADW]

Looks like you found your get out of jail card. Many people find themselves getting caught falling behind with vat so you won't be the first or last.