Insolvency can I lose my home

[Contractor75]

As stated above this is not about the Company's debts, this is about the debt the Director personally owes to the Company. He is a debtor, not a creditor.

I agree he is a debtor, but what happens to debt's owed to a company that has been dissolved?

I understand this is probably not an option now for the OP and the amounts are a bit high to hope HMRC let's it through the net.

 

[Mr D]

When are these new powers coming? Reading through the forum I was under the impression all debts die when the company is dissolved. The only time HMRC would reinstate if they suspected tax evasion or the amounts were huge.

Company not yet dissolved so debts still payable.

And company has a substantial asset with which to settle HMRC debt.

 

[Paul Norman]

I agree he is a debtor, but what happens to debt's owed to a company that has been dissolved?

I understand this is probably not an option now for the OP and the amounts are a bit high to hope HMRC let's it through the net.

He is a debtor. However, because the money was taken as a loan, and not as a salary, tax is due. That tax is owed personally by the OP to the tax man as a result of deliberate actions.

Paying the money back to the dissolved company is not - I assume - either possible or needed (willing to be corrected here).

But the tax debt stands.

There is a lesson for all directors of businesses here. Make sure you understand how directors loans work.

 

[Paul Norman]

Company not yet dissolved so debts still payable.

And company has a substantial asset with which to settle HMRC debt.

This is correct.

 

[mattk]

I agree he is a debtor, but what happens to debt's owed to a company that has been dissolved?

I understand this is probably not an option now for the OP and the amounts are a bit high to hope HMRC let's it through the net.

If OP does not pay back the DLA to the company (which he can't) then this will be treated as income by HMRC and taxes accordingly. Therefore he will be left with a significant personal tax bill.

 

[Contractor75]

Company not yet dissolved so debts still payable.

And company has a substantial asset with which to settle HMRC debt.

He is a debtor. However, because the money was taken as a loan, and not as a salary, tax is due. That tax is owed personally by the OP to the tax man as a result of deliberate actions.

Paying the money back to the dissolved company is not - I assume - either possible or needed (willing to be corrected here).

But the tax debt stands.

There is a lesson for all directors of businesses here. Make sure you understand how directors loans work.

It depends if HMRC knows about the director's loan. For example, if the company is dissolved before any filing to HMRC that declares it, it means.... poof gone just like that..

 

[Lisa Thomas]

I agree he is a debtor, but what happens to debt's owed to a company that has been dissolved?

I understand this is probably not an option now for the OP and the amounts are a bit high to hope HMRC let's it through the net.

In that scenario:

The Director is at (slight) risk the Company is reinstated and Liquidated and Lqr pursues the debt.

The Director still has to declare it on their tax return and pay any relevant taxes.

Insolvency services take an interest and pursue the Director

 

[Lisa Thomas]

I think you may have misunderstood the position - The OP's Company seems to be in Liquidation so it has nothing to do with HMRC - the Liquidator is attempting to collect the debt in on behalf of the Company.

 

[Contractor75]

I think you may have missed the position - The OP's Company seems to be in Liquidation so it has nothing to do with HMRC - the Liquidator is attempting to collect the debt in on behalf of the Company.

True, I was talking hypothetically, if OP had used Spongebob before filing his return. Too late now.

 

[JEREMY HAWKE]

True, I was talking hypothetically, if OP had used Spongebob before filing his return. Too late now.

Your point is easy to understand but Bobs plan was intended for a director that may owe an amount on a DL but has no assets what so ever to repay
I would say using Bobs plan at any stage in the OPs situation would be very dodgy indeed

 

[Simon Green]

Having a very small Ltd Company with absolutely nothing left I implemented Bob’s Plan, But I also dealt with the guidance of an accountant the overdrawn Director Loan, this had a personal self-assessment tax implication.
My point is that Bob’s Plan and the overdrawn Director Loan are Not incompatible.

 

[Mr D]

Having a very small Ltd Company with absolutely nothing left I implemented Bob’s Plan, But I also dealt with the guidance of an accountant the overdrawn Director Loan, this had a personal self-assessment tax implication.
My point is that Bob’s Plan and the overdrawn Director Loan are Not incompatible.

Bob's plan invites the creditor to wind the company up.
If company is being handled by a liquidator however the company is already in the process of being dissolved. Now for someone to collect the debt owed in order to pay creditors.

The income tax problem of not paying some is another matter where HMRC will take action against the OP personally for tax due on other untaxed income.

 

[OMGVape]

So a director can suck every penny out of a failing company as a directors loan, and as long as he/she/it pays personal tax on it, the spongebob plan makes it all go away ?

 

[Mr D]

So a director can suck every penny out of a failing company as a directors loan, and as long as he/she/it pays personal tax on it, the spongebob plan makes it all go away ?

The plan in a nutshell.
Unless of course the director wants to use personal funds to pay for an IP to shut down the company - with the same result for creditors - or unless one or more creditors want to wind the company up at their own expense.

 

[JEREMY HAWKE]

Agree with @Mr D too
Director can pay him or herself 400 K from a 600 K turnover and pay the full rate tax as a salary and not a dividend and all is well
Why would any government agency be that bothered by the situation They have just received 40 % of tax revenue on 400K for as long as many years as the whole thing was able to survive

 

[ethical PR]

When are these new powers coming? Reading through the forum I was under the impression all debts die when the company is dissolved. The only time HMRC would reinstate if they suspected tax evasion or the amounts were huge.

There is a difference between company debt and personal debt.

 

[Contractor75]

There is a difference between company debt and personal debt.

A directors loan is a debt owed to the company, when the company is dissolved it's written off. At which point it becomes personally taxed as income for the person owing the debt (Director).

 

[Lisa Thomas]

I agree he is a debtor, but what happens to debt's owed to a company that has been dissolved?

/QUOTE]

They belong to Bona Vacantia

 

[ethical PR]

A directors loan is a debt owed to the company, when the company is dissolved it's written off. At which point it becomes personally taxed as income for the person owing the debt (Director).

Not necessarily if the company has been liquidated.