Liquidation, worried about BBL Fraud

[HeadScratching]

Just some views really, obviously we are speaking to a licensed IP.

It is looking like we will need to liquidate our company.

I'm worried now as I was flicking through everything, I've written out everything the BBL was spent on etc etc. But something came into my head and I realised that we took too much.

I think like loads of others I got confused with the turnover rule.

Our turnover from the 2019 return was 110k. We took 50K based on estimated turnover for the next year and I was correct in a massive jump in turnover due to taking staff on. So I didn't think I had done anything wrong.

I basically need to know if this is going to cause hassle because if it is, I have no choice but to find 50K asap and pay half the VAT so that I can do a TTP arrangement and stay afloat.
#

Would anyone have any real life experience?

I've started a new LTD company that hasn't traded yet, just starting a bank and VAT number but if I get struck off being a director I'm going to be screwed. Also I don't even think the rules would let my wife run the new LTD company as I'd still have significant charge over everything as I'm the only one that knows all!

 

[ChrisCallaghan]

Hi @HeadScratching ,

The two correct and technical answers are that you should speak with the IP you are dealing with, and that there answer should be be that they will report your conduct as director, including any issues regarding the BBL and your application for it, to the Insolvency Service, who then in turn decide if they wish to pursue any action against you. No IP can tell you with any certainty what that outcome will be unfortunately.

The more helpful answer is that, in my experience, you will likely be issued with a director's ban. If you can truly show that you used the BBL in the right way, i.e. for the benefit of the business, then any appointed IP/liquidator is highly unlikely to pursue any financial recovery, however as mentioned I would expect the Insolvency Service to pursue a director ban. Bans can range from 2 - 15 years, however based on my cases and published bans by the Insolvency Service, you may be looking at anywhere between 5 - 8 years.

Hope that helps! I appreciate you are already working with an IP, but happy to make myself available for any needed 2nd opinions!

 

[Lisa Thomas]

Thirded ;-)

 

[HeadScratching]

Thank you.

In your experience is it likely to catch up if I don't liquidate anyway?

I feel like I don't have a choice but to try and get some money from somewhere to pay this.

 

[ChrisCallaghan]

Thank you.

In your experience is it likely to catch up if I don't liquidate anyway?

I feel like I don't have a choice but to try and get some money from somewhere to pay this.

Yes, it will likely catch up with you eventually. When will depend on your company's creditors to a certain extent. Other than the BBL, what are your company's other debts?

 

[IanSuth]

How much BBL is left ?- is there any way to pay that ?- as the initial size of it due to the miscalculated TO is the thing that might lead to a ban, surely getting that sorted and away will remove that risk and allow you to get trading again sooner

 

[HeadScratching]

Yes, it will likely catch up with you eventually. When will depend on your company's creditors to a certain extent. Other than the BBL, what are your company's other debts?

HMRC debts.

Everything is being paid but VAT didn't want a payment plan.

If I can speak to them again and get one in place or pay a sizable chunk then everything should be fine and paid.

Just whether I'll get struck off even if we don't liquidate

 

[ChrisCallaghan]

If you choose to keep the company, you will need to come to agreed repayment terms with your creditors. HMRC in particular are a creditor who will wind up your company (aka compulsory liquidation) on a long enough timescale. We believe that banks are now also taking action to wind up company's if they suspect BBL miss-use or miss-application.

 

[Lisa Thomas]

Thank you.

In your experience is it likely to catch up if I don't liquidate anyway?

I feel like I don't have a choice but to try and get some money from somewhere to pay this.

All depends on the figures really.

Unfortunately there's no definite answer/ guarantee.

Creditors can force the company into compulsory liquidation, or the Insolvency Services have the power to investigate insolvent companies that have avoided liquidation and gone straight to dissolution.

Both of those come with a risk of being prosecuted, fined, and/or disqualified.

 

[HeadScratching]

Thank you.

I've got a meeting with IP next week but I feel I will have to sort this.

VAT were very funny about a payment plan. Maybe we can squeeze 2-3 years out of them if I can raise a big chunk

 

[Elliot Green]

Just some views really, obviously we are speaking to a licensed IP.

It is looking like we will need to liquidate our company.

I'm worried now as I was flicking through everything, I've written out everything the BBL was spent on etc etc. But something came into my head and I realised that we took too much.

I think like loads of others I got confused with the turnover rule.

Our turnover from the 2019 return was 110k. We took 50K based on estimated turnover for the next year and I was correct in a massive jump in turnover due to taking staff on. So I didn't think I had done anything wrong.

I basically need to know if this is going to cause hassle because if it is, I have no choice but to find 50K asap and pay half the VAT so that I can do a TTP arrangement and stay afloat.
#

Would anyone have any real life experience?

I've started a new LTD company that hasn't traded yet, just starting a bank and VAT number but if I get struck off being a director I'm going to be screwed. Also I don't even think the rules would let my wife run the new LTD company as I'd still have significant charge over everything as I'm the only one that knows all!

It is well established a director cannot just be a director at Companies House and let someone else hold the wheel that runs the company. Here is a recent case in which a director tried such an argument and got slapped with a sumptuous 10 year disqualification period:

Can I Just Be A Director At Companies House? - Oliver Elliot

Can I Just Be A Director At Companies House? You cannot as a director act in a way that leads to director abdication of responsibility.

www.oliverelliot.co.uk

Your turnover issue is not uncommon. However, most directors who are disqualified end up on the naughty step by consent. In other words, no Court has determined the matter; it is put to them by the Insolvency Service and through negotiation they commonly settle via what is known as a Director Disqualification Undertaking when they agree to a period of disqualification. Many directors (it appears) might not challenge the position and accept what the Insolvency Service puts to them.

The number of directors in 2023-2024 disqualified under the main prosecution position (Section 6) was 1,164 of which 831 related to Covid finance cases such as Bounce Back loans.

Insolvency Service Enforcement Outcomes 2023-24

www.gov.uk

There are not a lot of cases to cherry-pick from that show you how the Court determines a case that is properly argued based on a director who puts forward a credible position that they misunderstood the turnover position.

 

[Porky]

@HeadScratching
Blimey, can't help but feel that there is a heck of a lot of over thinking going on in this thread of what could be, might be, might not be. As the saying goes, if my mum had wheels she would be a bicycle.

Look, my advise would be go and sit down with your IP and get it sorted, part of the debts you have a balance on a BBL, don't over think did you play by the rules or not, there are zillions of small businesses out there that got confused as hell with the scheme at the back drop of awful trading conditions. That's in the past now, its done. You cant change that. The business didn't work out and it failed, you did your best, nobody sets out to fail.

If you go through the process and it goes down the line and the bank have claim against the balance of the BBL from you, deal with that then and agree terms, but you cant pay what you cant pay. As for being struck off, yes small risk yada yada, but i don't see it myself. I don't think there would be a director left in the UK if they all got struck off for self declarations of what you thought your turnover would be under that ridiculous BBL scheme.

You did your best, don't create more problems for yourself, the bank lent the business cash under the scheme and its now in default, that's it. Join thousands of others.

On a positive note, the bank could just write the BBL off you never know but i see it as two different things here a) would you be forced to pay anything back under the BBL - possibly not but maybe and that's something you can work on b) is your conduct as a director questionable - maybe but i don't see it, just think you are overthinking the situation and over worrying.

I think once you have had a chat with your IP and get the process started, work though it, you will feel better and soon be on the other side of it.

Good luck

 

[UKSBD]

Our turnover from the 2019 return was 110k.

What month in 2019 was that up to?

 

[HeadScratching]

Nov 19

 

[H Karaer]

Just some views really, obviously we are speaking to a licensed IP.

It is looking like we will need to liquidate our company.

I'm worried now as I was flicking through everything, I've written out everything the BBL was spent on etc etc. But something came into my head and I realised that we took too much.

I think like loads of others I got confused with the turnover rule.

Our turnover from the 2019 return was 110k. We took 50K based on estimated turnover for the next year and I was correct in a massive jump in turnover due to taking staff on. So I didn't think I had done anything wrong.

I basically need to know if this is going to cause hassle because if it is, I have no choice but to find 50K asap and pay half the VAT so that I can do a TTP arrangement and stay afloat.
#

Would anyone have any real life experience?

I've started a new LTD company that hasn't traded yet, just starting a bank and VAT number but if I get struck off being a director I'm going to be screwed. Also I don't even think the rules would let my wife run the new LTD company as I'd still have significant charge over everything as I'm the only one that knows all!

In my personal experience, avoid working with Insolvency Practitioners (IPs) as they often act like sharks and may not have your best interests at heart. If you are considering liquidation, it's better to directly contact your bank or creditors and invite them to liquidate your company. Banks typically don't review your original application; claims to the contrary may just be scare tactics to push you into certain actions.
If you decide to proceed with an IP, ensure you haven't withdrawn funds from the business for personal use or made any significant payments, as IPs can hold you personally liable and potentially bankrupt you. They might also add exorbitant fees on top of the original amounts owed.

Would like to say more but I can't provide further details here. Best of luck

 

[HeadScratching]

In my personal experience, avoid working with Insolvency Practitioners (IPs) as they often act like sharks and may not have your best interests at heart. If you are considering liquidation, it's better to directly contact your bank or creditors and invite them to liquidate your company. Banks typically don't review your original application; claims to the contrary may just be scare tactics to push you into certain actions.
If you decide to proceed with an IP, ensure you haven't withdrawn funds from the business for personal use or made any significant payments, as IPs can hold you personally liable and potentially bankrupt you. They might also add exorbitant fees on top of the original amounts owed.

Would like to say more but I can't provide further details here. Best of luck

But surely that is "winding up"?

 

[ChrisCallaghan]

In my personal experience, avoid working with Insolvency Practitioners (IPs) as they often act like sharks and may not have your best interests at heart. If you are considering liquidation, it's better to directly contact your bank or creditors and invite them to liquidate your company. Banks typically don't review your original application; claims to the contrary may just be scare tactics to push you into certain actions.
If you decide to proceed with an IP, ensure you haven't withdrawn funds from the business for personal use or made any significant payments, as IPs can hold you personally liable and potentially bankrupt you. They might also add exorbitant fees on top of the original amounts owed.

Would like to say more but I can't provide further details here. Best of luck

I'm sorry if you've had a negative experience. Ultimately IPs are individuals, and the quality and honesty of the service can be dependent on who is advising.

That being said, I feel that referring to everyone in my profession as sharks is needlessly derogatory. If you take the time to read the posts and comments by myself and the IPs on this forum (or just this post alone!), you'll find nothing but direct and honest advice, even if that actually puts people off using our services!

If I have bad service from a plumber, I wouldn't refer to every plumber as a cowboy.

 

[ChrisCallaghan]

But surely that is "winding up"?

It is yes. Typically in a compulsory winding up (aka a compulsory liquidation) a creditor will petition for your company to be closed on the grounds that it is insolvent. The government's Official Reciever is then appointed to handle the liquidation itself. It is then possible for the liquidation to end up with an insolvency practice, but most cases will stay with the Official Reciever.

The questions and concerns you raised when starting this thread would still be the same in a compulsory winding up scenario, as would the answers myself and others have given.

On the positive, this option does not involve paying an insolvency practitioner's fees. The negative is a time and uncertainty.

In your case, I suspect HMRC will be the most likely creditor to come forward first to wind up your company, but timescales are incredibly uncertain. It could be months or it could be years. Please be mindful that with this option, until a creditor actually takes the action to wind up your company, you are still contactable for debt enforcement action. You STILL remain NOT personally liable for the HMRC and BBL debt, but as the company's director you are the point of contact for any enforcement action.

If you feel closing your company is the right option, then with your company's creditor profile I feel it becomes a choice of a Voluntary Liquidation vs waiting for a Compulsary Liquidation, and then it would be up to you to weigh the positives and negatives.

For me, Voluntary Liquidation has a cost, but means getting it over and done with, and moving on sooner rather than later. If a director's ban is part of that outcome, then the sooner it starts, then the sooner it ends.

A Compulsory Liquidation for me has one major appeal - no cost. But it does mean 'kicking the can down the road'

All of the above is based on IF you decide to cease to trade. As you've already indicated @HeadScratching , if you feel you can come to an agreed payment arrangement with HMRC, then you may not have to consider these options.

(my apologies if the above is a bit long winded! )

 

[Lisa Thomas]

Thank you.

I've got a meeting with IP next week but I feel I will have to sort this.

VAT were very funny about a payment plan. Maybe we can squeeze 2-3 years out of them if I can raise a big chunk

Yes they are clamping back down on their Time To Pay ('TTP') plans again. From what I am hearing they are mainly insisting on the debt being repaid within 12months.

The potential to extend this would be via a formal insolvency process called a CVA (Company Voluntary Arrangement) where debt can be repaid over a period up to 5 years, but that might not suit your circumstances.

 

[Lisa Thomas]

In my personal experience, avoid working with Insolvency Practitioners (IPs) as they often act like sharks and may not have your best interests at heart.

How many IP's have you worked with? I don't think it's fair to make a sweeping generalisation against us all.

Unfortunately you are right - we won't necessarily have the directors best interests at heart. That is because once appointed, we act for the benefit of the creditors, and have a duty to investigate the directors conduct and pursue them personally IF there has been wrong doing.

Banks typically don't review your original application; claims to the contrary may just be scare tactics to push you into certain actions.

I'm not so sure. I am hearing that the government is starting to challenge and even reject some bank requests to pay out unpaid BBL's under the guarantee. The banks are therefore now purportedly retrospectively carrying out due diligence.

In some serious cases of fraud they are winding up companies in bulk applications

If you decide to proceed with an IP, ensure you haven't withdrawn funds from the business for personal use or made any significant payments, as IPs can hold you personally liable and potentially bankrupt you. They might also add exorbitant fees on top of the original amounts owed.

Yes, I'm afraid we don't work for free. We are usually paid from the company's assets and those costs are usually approved by the creditors or the Court. The costs are in a roundabout way therefore paid out of the creditors pockets.

 

[H Karaer]

I'm sorry if you've had a negative experience. Ultimately IPs are individuals, and the quality and honesty of the service can be dependent on who is advising.

That being said, I feel that referring to everyone in my profession as sharks is needlessly derogatory. If you take the time to read the posts and comments by myself and the IPs on this forum (or just this post alone!), you'll find nothing but direct and honest advice, even if that actually puts people off using our services!

If I have bad service from a plumber, I wouldn't refer to every plumber as a cowboy.

If you read what I wrote, you’ll notice that I said “often,” not “always” or “all.” This sentiment is not just from my experience but also from three other small business owners in the same village. We have all worked very hard our entire lives to keep our business going but unfortunately faced similar issues with Insolvency Practitioners (IPs).

 

[HeadScratching]

Yes they are clamping back down on their Time To Pay ('TTP') plans again. From what I am hearing they are mainly insisting on the debt being repaid within 12months.

The potential to extend this would be via a formal insolvency process called a CVA (Company Voluntary Arrangement) where debt can be repaid over a period up to 5 years, but that might not suit your circumstances.

Thank you.

I really appreciate the advice.

I've been told by a couple of IPs now that HMRC aren't likely to accept a CVA.

I'm wondering if I can pay half the VAT if they will accept it.

I've sat down over the weekend and I'm pretty sure I can raise 60k within 2 months.....

Should make a big difference.

 

[Lisa Thomas]

The key is to look at what has caused the company to become insolvent in the first place, and whether you can fix it. If you can't then it might be best to pull the plug rather than invest more savings etc.

 

[UK Contractor Accountant]

Also I don't even think the rules would let my wife run the new LTD company as I'd still have significant charge over everything as I'm the only one that knows all!

Surely you will just be the Manager of the business - your wife will be the one who will be making all the executive decisions.

There is a risk that the Bank might issue a default notice and ask for payment in full of the BBL outstanding should they do a check on the BBL application and link back to the declared turnover.

 

[HeadScratching]

The key is to look at what has caused the company to become insolvent in the first place, and whether you can fix it. If you can't then it might be best to pull the plug rather than invest more savings etc.

Poor running, poor accounting.

We really are getting there now such bad timing

 

[Lisa Thomas]

Poor running, poor accounting.

We really are getting there now such bad timing

Where will the £60k come from? Might be simpler to liquidate and start again via a new entity (known as a phoenix).

You can find more info about a phoenix here (it's too much to summarise in a post!)

- YouTube

Enjoy the videos and music that you love, upload original content and share it all with friends, family and the world on YouTube.

youtu.be

and here:

- YouTube

Enjoy the videos and music that you love, upload original content and share it all with friends, family and the world on YouTube.

youtu.be

 

[HeadScratching]

Thanks.

It probably would be easier to a point but my worries are:

- We're in a good place at the moment and a liquidation for 6 years will effect us.
- We won't be able to get proper insurance (I do not know why but it makes such a massive difference to motor trade)
- It effects some of our licenses
- It effects the lease (I don't think the landlord will mind too much but it will cost 10k in solicitors and a new deposit)
- The grief of everything being transferred to a new LTD company.
- Accounts we have built up will have to close

The money will come from some business and some personal assets. We have some vehicles that in their currents states aren't worth a lot but when fixed they are. If I just bust my balls and put the hours in it will generate quick money.

Also I can get a loan based on the card machine. We have used them without any issues fairly often in upgrading equipment or buying assets to sell and it has always worked well.

I don't feel I'm doing anything wrong here as it's director backed so I won't be knocking them.

I feel it's a catch 22 as I have no idea if and when HMRC will start to wind us up, do we get good warning?

I get VAT want their £120k and won't want a CVA but what about 60K?

If I just started paying it I might get it paid before they get round to winding us up or they might start next week.

It's a real minefield.

 

[Lisa Thomas]

Thanks.

It probably would be easier to a point but my worries are:

- We're in a good place at the moment and a liquidation for 6 years will effect us.

Where does the 6 year come from? That tends to apply with personal insolvency, not liquidation.

- We won't be able to get proper insurance (I do not know why but it makes such a massive difference to motor trade)
- It effects some of our licenses
- It effects the lease (I don't think the landlord will mind too much but it will cost 10k in solicitors and a new deposit)
- The grief of everything being transferred to a new LTD company.
- Accounts we have built up will have to close

The money will come from some business and some personal assets. We have some vehicles that in their currents states aren't worth a lot but when fixed they are. If I just bust my balls and put the hours in it will generate quick money.

Also I can get a loan based on the card machine. We have used them without any issues fairly often in upgrading equipment or buying assets to sell and it has always worked well.

I don't feel I'm doing anything wrong here as it's director backed so I won't be knocking them.

I feel it's a catch 22 as I have no idea if and when HMRC will start to wind us up, do we get good warning?

Yes, usually you will receive chaser/demand letters, warnings of court enforcement offices attending or a statutory demand.

I get VAT want their £120k and won't want a CVA but what about 60K?

Only they can decide but sounds like a good offer to me. The alternative is liquidation and risk they will get little, if anything, back.

If I just started paying it I might get it paid before they get round to winding us up or they might start next week.

It's a real minefield.

 

[HeadScratching]

Insurance has said 6 years!