Selling a business with debt?

[Janemorley74]

Hi. Im looking to sell my business which has around 50k hmrc debt.

With stock, assets, good turnover i could probably get around 95k for the limited company. Which i would pay off.

However would it be better for a buyer to purchase the business from me for 45k and take on the repayment plan?.

Is that possible if they purchase the limited company?, this does not move with director?.
What is they dont pay after the sale?.

Im thinking a lower purchase fee might be more attractive upfront as the stock and assets co e to around 75k.

Thanks
Jane

 

[numbersrule]

I am not an Insolvency Practitioner.

You probably need an Insolvency Practitioner.

That is irrespective of whether or not you think the business is Insolvent.

it's just that an Insolvency Practitioner would be able to provide you with Expert Advice on how to handle the sale.

It depends on the reasons why the HMRC Debt exists.

You say 'the' Repayment Plan.
Is there already a Repayment Plan in place? Over how long?

Are you the Sole Director?

HMRC might only make you personally liable if there has been wrongdoing.

Which Taxes does the Debt relate to and how much for each?

it depends why the Debt exists.

From the limited information available it seems to me that you are simply using HMRC as a low cost form of Credit.

Is that because you have poor Creditworthiness and have therefore been unable to borrow to fund the business?

If this is all true you will need to be aware that some 'Rescue Vultures' sometimes come in and buy the Assets and take the Client Contact List but don't buy the Shares with the aim of leaving you with responsibility for the Debt.

As I say you need an IP.

 

[pentel]

In my opinion it is unlikely that anyone would buy such a small business with these debts. The legal and accountancy costs for buying a limited company could easily run to over £10,000 each for both buyer and seller.

 

[DavidAshdown]

Hi. Im looking to sell my business which has around 50k hmrc debt.

With stock, assets, good turnover i could probably get around 95k for the limited company. Which i would pay off.

However would it be better for a buyer to purchase the business from me for 45k and take on the repayment plan?.

Is that possible if they purchase the limited company?, this does not move with director?.
What is they dont pay after the sale?.

Im thinking a lower purchase fee might be more attractive upfront as the stock and assets co e to around 75k.

Thanks
Jane

Out of interest, what industry are you in?

 

[Mark T Jones]

It takes time and money to sell a business 'properly' - as mentioned, a distressed/ rushed sale will leave you extremely vulnerable to sharks.

The reason for debt will be part of the answer but id suggesest selling the stock and assets is probably your safest route

 

[fisicx]

Stock and assets will likely be worth a fraction of what you paid for them.

A laptop brought last year for £1000 may only realise £100. It’s quite cutthroat.

 

[Lisa Thomas]

Have the assets been valued by a professional valuer?

The Company is insolvent so the directors need to be extremely cautious with what they do with the company, and its assets so as not to fall foul of the Insolvency Act 1986 and potential breaches of their statutory duties which could come back to bite them personally if they inadvertently commit misconduct.

Happy to have a free chat with you to explore options.

Feel free to get in touch.

 

[mahad]

If they buy the Ltd rather than just the assets, the HMRC debt would normally stay with the company, so I'd get proper advice before structuring it that way.

 

[Grace Reed]

I am not an Insolvency Practitioner.

You probably need an Insolvency Practitioner.

That is irrespective of whether or not you think the business is Insolvent.

it's just that an Insolvency Practitioner would be able to provide you with Expert Advice on how to handle the sale.

It depends on the reasons why the HMRC Debt exists.

You say 'the' Repayment Plan.
Is there already a Repayment Plan in place? Over how long?

Are you the Sole Director?

HMRC might only make you personally liable if there has been wrongdoing.

Which Taxes does the Debt relate to and how much for each?

it depends why the Debt exists.

From the limited information available it seems to me that you are simply using HMRC as a low cost form of Credit.

Is that because you have poor Creditworthiness and have therefore been unable to borrow to fund the business?

If this is all true you will need to be aware that some 'Rescue Vultures' sometimes come in and buy the Assets and take the Client Contact List but don't buy the Shares with the aim of leaving you with responsibility for the Debt.

As I say you need an IP.

It might be worth getting proper advice before structuring this deal, especially because HMRC debt behaves very differently depending on whether you are selling the shares of the limited company or just the business/assets.

In most cases, HMRC debt stays with the company, not the director personally — but that also means a buyer taking over the company is effectively inheriting that liability, which can make a share purchase much more complex and less attractive unless it is fully disclosed and agreed in writing.

A common alternative is exactly what you mentioned: an asset sale, where the buyer purchases stock, equipment, goodwill etc., but the existing company (and its debts) remains with the seller. That usually avoids the risk for the buyer, but it also changes valuation and tax implications.

Because there are real risks around:

• HMRC enforcement and repayment plans
• liability transfer (or lack of it)
• and what exactly is being sold (shares vs assets)

it would be sensible to get a UK commercial solicitor or accountant to structure it properly before you speak to buyers.

If you want a second opinion, feel free to message me and I can point you in the right direction of someone who deals with these kinds of business sales regularly.