Here are what I see as the cruces of the issue:
Let me just say at the outset that 'The Spongebob Plan' is very simple, highly effective, and 100% lawful.
So not "you can get away with it because nobody notices" or "nobody is going to chase a few hundred/thousand pounds so its all OK" you are stating that the The Spongebob Plan is 100% lawful. If it is not (i) you are wrong and (ii) you are inciting and aiding others to follow a course of action that is not lawful.
It was never intended to be a way of avoiding tax or shafting creditors.
So if it does in fact facilitate avoiding tax or defrauding creditors, then it fails.
3. A letter is sent out to all creditors of the company as follows;
Unfortunately the company has no assets
In order for this statement to made, the company must in fact have no assets, i.e. no stock, no loan to directors, no debtors, no plant and equipment, nothing. It is difficult to see how a company can have arrived at this position while trading.
4. I generally recommend that all stock and other assets are removed from the company's premises and taken to a place of safe keeping. This is specifically to protect said assets from the risk of seizure by bailiffs acting on behalf of the landlord or another creditor. It is a responsibilty of the directors of the company that all creditors are treated equally; allowing one creditor to seize all the assets would constitute a breach of that responsibility.
Ah, so there are some assets. You obviously need to change the statement in the letter; perhaps "the company has insufficient assets from which to appoint an insolvency practicioner" as we know, this is likely to cost upwards of £5,000 so if the aggregate value of the assets (before netting with any liabilities) is less than this, you may be able to make this statement honestly.
Note that I do not use the word "honestly" from any moral standpoint, I use it in the sense of the Fraud Act 2006 ("Fraud by false representation: a person is in breach of this section if he dishonestly makes a false representation, and
")
5. 3 months after ceasing trading an application is made to Companies House using form DS01 for the striking off of the company. Notification of the application is sent to all creditors and other interested parties so as to comply with all relevent legislation.
Form DS01 includes a statement by the Directors in relation to
S1004 and
S1005 of the Companies Act 2006 you MUST go through each of these ensuring they dont apply for instance the three months runs from the date of the last disposal of any trading asset (S1003(c)), not from ceasing trading. Note also that there is a deadline for sending notices to interested parties; there is no reason not to do this at the same time.
And here is the big loophole...
All the law says is that all creditors must be notified that an application for striking off has been made. Nowhere does the law say that a creditor must be informed of the size of the debt owed.
In the specific case of HMRC the extent of any debt owed is generally self declared by the debtor by means of a tax return. Tax returns are due to be sent in by certain due dates. If a director applies to have his company struck off before that due date he has no obligation whatsoever to divulge to HMRC the extent of any debt.
What happens in these circumstances is that HMRC receive notification from the company that an application has been made for striking off but on checking their records they find that no monies are due. Therefore no objection to the striking off is made and it goes through automatically.
This is not a "loophole". Liability to tax, and to make a return to HMRC declaring any tax due, is nothing to do with whether a company is shown as 'active' on the Register of Companies. Consider the analogy of a self employed person: Self Assessment returns for individuals must normally be submitted by the 31 January following the year of assessment. But what if he dies on the 1 January? Is he no longer liable to pay tax for the previous year? Or to make a return and pay tax for the current year? Of course this is not the case the returns must be submitted and the tax paid: anyone that is responsible for distributing his assets before that is done commits a crime. But the person that died did so perfectly lawfully!
This analogy is not perfect; there are laws that apply when a natural person dies that do not when a company is wound up and
vice versa, and of course the action of winding up a company is reversible (in certain circumstances, such as unpaid taxes or at the demand of a creditor, the Registrar can restore a company to the register at any time within 20 years) whereas death is more permanent.
So do not be deceived by the mechanics of the winding-up procedure into thinking that it enables a company to escape the payment of taxes that are already due.
If this happens the assets of the company technically become the property of the Crown. However, the Crown has no idea that the assets even exist! In reality, the directors get to keep them.
What is the word "technically" intended to add here? If it is intended to mean that the Crown does not in fact own the assets, and so the appropriation of those assets by a director is not theft then the statement is wrong.
Clearly theft is not lawful, and so again the plan fails. One irony of this is that if the shareholders (acting as shareholders, not as directors) write to the bona vacentia office, the Crown will normally disclaim its interest in assets of little value, so that the shareholders can lawfully take them. With a little more diligence and a little less autodidactic arrogance this 'plan' could actually become useable, and useful.
Let me reiterate once and for all that it it is competley lawful in every way.
Clearly not. In summary:
- A company cannot lawfully state to creditors that it has no assets when in fact it does (Fraud Act 2006 S2)
- If a company has received a notice to submit a tax return it cannot lawfully fail to file that return. (Finance Act 1998 Sch 18 Para 3)
- If a company has not received a notice to submit a tax return it cannot lawfully fail to notify HMRC that it is chargeable to tax. (Finance Act 1998 Sch 18 Para 2)
- A company cannot lawfully fail to declare to HMRC that Corporation Tax is due intending to benefit by that omission (Fraud Act 2006 S3)
- A person cannot lawfully be a party to actions of a company intended to defraud its creditors or any fraudulent purpose (Companies Act 2006 S993)
- A person cannot lawfully, dishonestly appropriate property belonging to the Crown with the intention of permanently depriving the Crown of it (Theft Act 1968 S1)
Hundreds of people have benefitted from it and each of them owes me a pint. I hope to spend my dotage collecting my debts!
I hope you are planning a long and healthy retirement as you will have to wait a while before you can reasonably collect:
- HMRC may commence an action in pursuit of taxes which have been fraudulently evaded up to 21 years after the event.
- The Registrar of Companies may restore a company to the register for 20 years after it has been wound up.
