Limited company no BBL, spongebob

[ChrisCallaghan]

Reinstatement does not cost HMRC thousands and in any event, it has deep pockets and in house lawyers.

@Surrey_bloke my apologies, we've gotten a little bit away from answering questions for you here.

What Elliot is referring to is that HMRC will, on occasion, re-instate a dissolved company to then force the company into liquidation, with the liquidation then being typically handled by the government's Official Receiver's office - they will then carry out an investigation into the company's affairs and the directors conduct.

The motivation for this would for scenarios similar to yours - to investigate whether there are undeclared tax liabilities, director misconduct and also to look for recoverable assets - in your case the director loan.

Whilst this does occur, it is more common that HMRC will object to any dissolution before it goes through and then petition for the company to be wound up, but both are options HMRC have in their toolkit.

All of this is additional info that is worth being aware of, with your options still being pretty much the same:

• Invite creditors to wind up and notify them that you plan apply to strike off the company once 3 months have elapsed from you ceasing to trade. HMRC have the right to object - if they exercise this right, they will typically then petition for the company to be wound up - see above - timescales for this vary wildly. As Elliot has pointed out, if you are successful in an application to strike off, HMRC could still apply to re-instate the company to then wind it up (aka compulsory liquidation).
• If you'd prefer certainty, explore a Voluntary Liquidation with an IP firm (like myself, @Elliot Green or @Lisa Thomas ) - issues such as the directors loan account would then be discussed before the company enters into liquidation.

As previously offered, more than happy to offer a no obligation phone chat to discuss all of the matters in this thread in more detail if you'd find that helpful.

 

[Surrey_bloke]

Reinstatement does not cost HMRC thousands and in any event, it has deep pockets and in house lawyers.

In your experience how many of the hundreds of thousands of dissolved companies are reinstated by HMRC, assuming no BBL, per year? Please be honest. I see directors on companies house with 10-20 companies dissolved.

The reason I ask is what I have read about the voluntary dissolution process posts here and other forums, most of the time, the chances of reinstatement were seen as very remote. Has this changed?

 

[Surrey_bloke]

I haven't read all the replies so apologies if I'm repeating something here.

I assume your overdrawn directors loan is c£30k?

What is your ability to repay some/all of that money to the company? You could use some of that repayment to cover the cost of liquidation.

Does the company have any other assets - physical or debtors etc?

I will have to ask family and borrow money and try and pay back into the company as it seems SpongeBob method is no longer viable as it once was based on the comments here, thanks for all great advice. I would rather do this than have sleepless nights about the company being reinstated in 3 years time when I thought it was dissolved. Seems like limited liability is not as limited as it I thought it was

 

[Elliot Green]

Companies reinstated in England and Wales in the year 2023-2024 appears in total to have been 7,113. It is not known (at least by me) who initiated those reinstatements.

Directors with dissolved companies is very common and it appears in the same year and in the same jurisdiction, there were 626,778 dissolutions. However, many companies that are dissolved will have been solvent and or not insolvent. I would anticipate the vast majority will have been of that nature.

The prospect of reinstatement is unpredictable. More likely perhaps as @Chris Callaghan has submitted, HMRC may object before dissolution.

You could probably liquidate the company in a reasonably cost effective manner. If you want a quote or further discussion then by all means get in touch via our website where there are contact forms to enable the same.

 

[ChrisCallaghan]

Companies reinstated in England and Wales in the year 2023-2024 appears in total to have been 7,113. It is not known (at least by me) who initiated those reinstatements.

Thanks Elliot, was just trying to find those numbers.

In your experience how many of the hundreds of thousands of dissolved companies are reinstated by HMRC,

Quite rare in my opinion, but certainly not impossible. Unfortunately no one can give you any guarantees, however it is much more common to see HMRC object in the first place and (eventually) seek a winding up petition. To give you an understanding of how commonly HMRC seek a winding up petition, last week there was 119 winding up hearings with HMRC listed as the petitioning creditor, with 128 the week before. I would love to be able to tell you how many of those are against a company that HMRC have re-instated following a dissolution, but that would take me an age to research I'm afraid!

If you re-read the guide written by Spongebob, it does provision for the outcome of a creditor such as HMRC taking this action - it does not assume that applying to strike off would be the most likely or successful option, just a potential outcome. It is for this reason the guide is titled "CLOSING AN INSOLVENT LIMITED COMPANY WITH INSUFFICIENT FUNDS WITH WHICH TO PAY AN INSOLVENCY PRACTITIONER" - as apposed to "HOW TO STRIKE OF MY COMPANY WITH DEBT"

 

[Surrey_bloke]

Thanks Elliot, was just trying to find those numbers.



Quite rare in my opinion, but certainly not impossible. Unfortunately no one can give you any guarantees, however it is much more common to see HMRC object in the first place and (eventually) seek a winding up petition. To give you an understanding of how commonly HMRC seek a winding up petition, last week there was 119 winding up hearings with HMRC listed as the petitioning creditor, with 128 the week before. I would love to be able to tell you how many of those are against a company that HMRC have re-instated following a dissolution, but that would take me an age to research I'm afraid!

If you re-read the guide written by Spongebob, it does provision for the outcome of a creditor such as HMRC taking this action - it does not assume that applying to strike off would be the most likely or successful option, just a potential outcome. It is for this reason the guide is titled "CLOSING AN INSOLVENT LIMITED COMPANY WITH INSUFFICIENT FUNDS WITH WHICH TO PAY AN INSOLVENCY PRACTITIONER" - as apposed to "HOW TO STRIKE OF MY COMPANY WITH DEBT"

Thanks Chris, I understand, it's more of a take your chances type process, even if the company is dissolved then I have to spend the my life worrying about HMRC reinstating 10 years down the line, would prefer to sort it now.

I assume if I pay back the DL and pay all taxes, returns are up to date and then dissolve HMRC will then not reinstate the company?

 

[UKSBD]

I will have to ask family and borrow money and try and pay back into the company as it seems SpongeBob method is no longer viable as it once was based on the comments here, thanks for all great advice. I would rather do this than have sleepless nights about the company being reinstated in 3 years time when I thought it was dissolved. Seems like limited liability is not as limited as it I thought it was

You are still looking at things from the business side of things and people are commenting based on that.

Try looking at it from a personal side.

Let's say you manage to get the company dissolved

You may think great, that £28k is written off

But, you personally then have £28k of untaxed income to declare, which could easily be a £15k with interest and penalties if you don't declare it.

 

[Surrey_bloke]

You are still looking at things from the business side of things and people are commenting based on that.

Try looking at it from a personal side.

Let's say you manage to get the company dissolved

You may think great, that £28k is written off

But, you personally then have £28k of untaxed income to declare, which could easily be a £15k with interest and penalties if you don't declare it.

Yes good point, I had obviously been reading out of date posts on here from SpongeBob et al. Will try and scrape together the money and put it back in the company to pay the CT and DL then try and dissolve the company.

 

[Elliot Green]

Not possible to say HMRC will not reinstate a company if x,y and z happens.

There can be a range of reasons and triggers that spark such matters.

However, the prospect of reinstatement in the future is perhaps likely lower if HMRC returns and payments are made because it appears axiomatic there would be fewer reasons for the same to be necessary.

To put matters into perspective, a company that has gone into Creditors Voluntary Liquidation or Compulsory Liquidation, seemingly *fully liquidated* can still be reinstated.

 

[ChrisCallaghan]

I assume if I pay back and DL and pay all taxes/returns are up to date and then dissolve HMRC will then not reinstate the company?

You could do this, and then assuming there is no balance owing to HMRC, then they would have no reason to object to a strike off application. You would need to file accounts and CT return, repay any directors loan and clear 100% of the CT debt, and then finally apply to dissolve the company

However, if you are considering this, then it would then be more sensible to speak to an IP firm (e.g. myself, @Elliot Green , @Lisa Thomas ) and consider a Voluntary Liquidation.

You would first personally cover the IP's cost for the liquidation - this in itself brings down the balance of any directors loan.

You would then liaise with the IP about any remaining director's loan - how much you end up repaying is on a means-tested basis, i.e. based on your income, expenditure and personal assets (for example, you have mentioned you rent your home, which is a positive here). It is then possible to then come to a settlement arrangement based on your circumstances and affordability, with some (or even much) of the director loan being written off.

You are still looking at things from the business side of things and people are commenting based on that.

Try looking at it from a personal side.

Let's say you manage to get the company dissolved

You may think great, that £28k is written off

But, you personally then have £28k of untaxed income to declare, which could easily be a £15k with interest and penalties if you don't declare it.

If the company was liquidated, you would then only need to declare any element of the directors loan account that was written off through the liquidation as income.

 

[ChrisCallaghan]

To put matters into perspective, a company that has gone into Creditors Voluntary Liquidation or Compulsory Liquidation, seemingly *fully liquidated* can still be reinstated.

Whilst this is also technically possible, it is so vanishingly rare that I think it can be safely dismissed.

 

[Elliot Green]

You are still looking at things from the business side of things and people are commenting based on that.

Try looking at it from a personal side.

Let's say you manage to get the company dissolved

You may think great, that £28k is written off

But, you personally then have £28k of untaxed income to declare, which could easily be a £15k with interest and penalties if you don't declare it.

This appears to refer to the Section 415 Income Tax (Trading and Other Income) Act 2005 provision.

 

[Surrey_bloke]

To put matters into perspective, a company that has gone into Creditors Voluntary Liquidation or Compulsory Liquidation, seemingly *fully liquidated* can still be reinstated.

Wow didn't know this, it begs the questions whats the point of dissolution if HMRC can willy undo that at a whim. In effect no company can be dissolved, what if it's 10 years down the line and you no longer have any the details of accounts of the company around and they reinstate?

 

[Elliot Green]

Whilst this is also technically possible, it is so vanishingly rare that I think it can be safely dismissed

It is not common but it does happen.

 

[Elliot Green]

Wow didn't know this, it begs the questions whats the point of dissolution if HMRC can willy undo that at a whim. In effect no company can be dissolved, what if it's 10 years down the line and you no longer have any the details of accounts of the company around and they reinstate?

Company reinstatement is not a flick-of-the-switch procedure. There have to be reasons to merit it.

Companies can and indeed are dissolved.

 

[UK Contractor Accountant]

Do absolutely nothing and the likelihood will be that Companies House will dissolve/strike off the company for you. They only seem to hold up the BBL cases at the moment. Yes, HMRC can object as a formality but if they don't actually know the size of the CT debt they tend to let it slide off into oblivion.

It's Self Assessment for Income Tax so its up to you to declare the money you have drawn from the company bank account as dividends or otherwise income on your Tax Return so keeping quite on this is tax fraud.

 

[Surrey_bloke]

Do absolutely nothing and the likelihood will be that Companies House will dissolve/strike off the company for you. They only seem to hold up the BBL cases at the moment. Yes, HMRC can object as a formality but if they don't actually know the size of the CT debt they tend to let it slide off into oblivion.

It's Self Assessment for Income Tax so its up to you to declare the money you have drawn from the company bank account as dividends or otherwise income on your Tax Return so keeping quite on this is tax fraud.

Ok, If I dissolve and it goes through then put the directors loan amount as a dividend on my SA and pay the tax owed I should be ok then. I think this is the route I will go through, it would just be adding to the existing dividends I would be declaring so will result in a higher amount of tax via SA. Given it's not due till next year I will be able to pay that.

 

[UKSBD]

Yes good point, I had obviously been reading out of date posts on here from SpongeBob et al. Will try and scrape together the money and put it back in the company to pay the CT and DL then try and dissolve the company.

Why would you want to dissolve the company if it has no debts?

You have a company that made £150k profit, your mistake was you just didn't account for the tax, why dissolve that one if you intend to start a new company to do the same thing?

 

[Surrey_bloke]

Why would you want to dissolve the company if it has no debts?

You have a company that made £150k profit, your mistake was you just didn't account for the tax, why dissolve that one if you intend to start a new company to do the same thing?

Read my first post it explain it all.

 

[UKSBD]

Read my first post it explain it all.

Sounds like you had a good business, but a contract finished, are you not going to try and get a new contract?

Are you going back to employment now?

 

[Surrey_bloke]

Sounds like you had a good business, but a contract finished, are you not going to try and get a new contract?

Are you going back to employment now?

The Market is quiet and can't be sure if I'll got for employment or contract. If I get a contract then I would endeavour to keep the company alive and take little in the way of renumeration in order to rebuild things. I guess im just planning for the worst case scenario.

 

[Lisa Thomas]

I will have to ask family and borrow money and try and pay back into the company as it seems SpongeBob method is no longer viable as it once was based on the comments here, thanks for all great advice. I would rather do this than have sleepless nights about the company being reinstated in 3 years time when I thought it was dissolved. Seems like limited liability is not as limited as it I thought it was

It is limited, because you are not personally responsible for the company's liabilities (unless you have committed misconduct or given personal guarantees).

Your position is different. You have borrowed a loan from the company, which should be paid back. That's different from being personally liable for the company's debts.

FYI you won't necessarily have to repay the whole sum if you are liquidating. Happy to talk to explain this in more detail, or watch here for info:

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