- Original Poster
- #1
Hi all - long-term lurker and now requester for information!
I am the managing director of one insolvent company and another (unrelated) solvent company.
I joined the insolvent company in March of this year and took 30% ownership in July to offset the founder (who now owns 70%) being unable to meet her obligations on increasing my contracted PAYE salary. I am aware that I probably should have walked away, but hey ho - I do love a turnaround story!
The founder (a resident of Spain) had a significant overdrawn DLA (over £80k) and was unable to repay. In an attempt to clean up the BS to entice capital to what is an interesting business, this was transferred to PAYE and she is responsible to pay tax in Spain. At the same time, the company changed accounting position to accrual instead of cash (again, for the same reason to interest capital).
The founder took a BBL in 2021 and also a capital advance from our card provider (both £50k). Neither of these cash injections were used to grow the business and the founder is disengaged from the company.
Since I joined the company, I have steered operations efficiently, and the business has been delivering 20% revenue improvements YOY, however this has not been enough and as of today; the business has an insolvent BS to the tune of £170k. I did have some hope that I could trade my way out of this mess however sales have dramatically slowed over the last 8 weeks (like for many), the cash-in-bank is negative and the future looks challenging without WC to increase marketing activities.
Yesterday, I spoke with an experienced IP who outlined my options and I am considering which is best. In the event of a liquidation, HMRC will (rightfully) request the DLA to be repaid as this will be seen as preferred. I doubt the founder will be able to pay, but frankly; this is not my concern. Should I try a CVA, I am also aware that I'll need WC, and taking into account the BS and economy, the chance of securing additional external funding is slim, therefore I will need the founder to pay back the business the DLA (which she will likely be unable to do).
I have informed the IP that I will revert within 2-4 weeks as I continue to drive sales to ensure we can pay creditors and shake as many trees as possible to find an investor (knowing that loans are out of the question).
Where I sit (and why I am on this forum) is for two reasons:
1. Next week (07.11), the business is due to pay a £27k VAT bill. This cash is in a savings account as I have removed VAT from every sale in the current account since joining (something which was not done before). HMRC informed me last time when I begged for Time To Pay that this was the last time (it has been every quarter for years). Is the learned opinion of the forum experts to pay the VAT bill in-full, or should I withhold the cash, try to negotiate another TTP and use as WC in an attempt to drive sales? Should I try to negotiate a TTP with HMRC, should I inform them of the insolvent position?
2. I am a contracted PAYE employee of the business (the only one, the rest being contractors). I did not draw my salary in October to give the business account some breathing space. I appreciate that after just 7-8 months in the business, this could be seen as foolish, however I am trying to do what is right and fair. That being said, I cannot realistically go without a salary therefore what risks are there should I now pay myself the October PAYE salary and then November salary prior to moving toward liquidation?
My apologies for a rather long-winded first post!
I am the managing director of one insolvent company and another (unrelated) solvent company.
I joined the insolvent company in March of this year and took 30% ownership in July to offset the founder (who now owns 70%) being unable to meet her obligations on increasing my contracted PAYE salary. I am aware that I probably should have walked away, but hey ho - I do love a turnaround story!
The founder (a resident of Spain) had a significant overdrawn DLA (over £80k) and was unable to repay. In an attempt to clean up the BS to entice capital to what is an interesting business, this was transferred to PAYE and she is responsible to pay tax in Spain. At the same time, the company changed accounting position to accrual instead of cash (again, for the same reason to interest capital).
The founder took a BBL in 2021 and also a capital advance from our card provider (both £50k). Neither of these cash injections were used to grow the business and the founder is disengaged from the company.
Since I joined the company, I have steered operations efficiently, and the business has been delivering 20% revenue improvements YOY, however this has not been enough and as of today; the business has an insolvent BS to the tune of £170k. I did have some hope that I could trade my way out of this mess however sales have dramatically slowed over the last 8 weeks (like for many), the cash-in-bank is negative and the future looks challenging without WC to increase marketing activities.
Yesterday, I spoke with an experienced IP who outlined my options and I am considering which is best. In the event of a liquidation, HMRC will (rightfully) request the DLA to be repaid as this will be seen as preferred. I doubt the founder will be able to pay, but frankly; this is not my concern. Should I try a CVA, I am also aware that I'll need WC, and taking into account the BS and economy, the chance of securing additional external funding is slim, therefore I will need the founder to pay back the business the DLA (which she will likely be unable to do).
I have informed the IP that I will revert within 2-4 weeks as I continue to drive sales to ensure we can pay creditors and shake as many trees as possible to find an investor (knowing that loans are out of the question).
Where I sit (and why I am on this forum) is for two reasons:
1. Next week (07.11), the business is due to pay a £27k VAT bill. This cash is in a savings account as I have removed VAT from every sale in the current account since joining (something which was not done before). HMRC informed me last time when I begged for Time To Pay that this was the last time (it has been every quarter for years). Is the learned opinion of the forum experts to pay the VAT bill in-full, or should I withhold the cash, try to negotiate another TTP and use as WC in an attempt to drive sales? Should I try to negotiate a TTP with HMRC, should I inform them of the insolvent position?
2. I am a contracted PAYE employee of the business (the only one, the rest being contractors). I did not draw my salary in October to give the business account some breathing space. I appreciate that after just 7-8 months in the business, this could be seen as foolish, however I am trying to do what is right and fair. That being said, I cannot realistically go without a salary therefore what risks are there should I now pay myself the October PAYE salary and then November salary prior to moving toward liquidation?
My apologies for a rather long-winded first post!
