Should I Notify HMRC About VAT Mistake If Closing Co?

[Geo888]

Hello

I set up a Ltd company that buys from Europe and sells in the UK. It is a small company with turnover under £100K. When I setup the company I heard about the VAT flat rate scheme where basically you just pay a smaller fixed percentage of your turnover and do not claim back any input VAT. As we buy from Europe and most of our invoices have no VAT on them I thought this would be perfect and could save us money.

The company has not worked out and has made a loss so I decided to close the company. I was going through the accounts making sure I had not made any mistakes as the losses seemed high and I thought maybe we had been paying to much VAT. As I was reading through the instructions again for how to use the flat rate scheme, and then reading through some forums I found that I had made a big mistake. Although the European invoices had 0 VAT on them I should have been paying the VAT on them on our VAT returns but could not then claim the VAT back. So by using the flat rate scheme I have actually shot myself in the foot.

The company has no debts apart from to myself and now the VAT correction. The company has no assets. I have never taken any wage, dividend or loan from the company.

I have read through the Spongebob plan and some other posts but would appreciate some clarification on some points:

1. Should I notify HMRC about the mistake? I want to get the company stricken off but if I notify them they are not going to allow that. The company has no assets or DLA so no way they can be paid anyway. I have been paying VAT and filing tax returns, just now I have discovered the VAT returns are wrong.

2. Should I resign as director? I am the only director. As there is no directors loan etc does that mean they can not come after me if I resign?

Thanks for any advice

Geo

 

[Scalloway]

Resigning as a director is not a good idea. it leaves the company drifting along like a rudderless ship.

Honesty says you should inform HMRC but what is the point of telling them about a debt the company can't repay?

 

[Lisa Thomas]

With regard to your query about whether HMRC would 'come after' you - it would not be HMRC it would be any Liquidator appointed that would have the powers to potentially pursue you (if relevant). Resigning as a Director makes no difference in Liquidation - if anything it would make things worse. The Liquidator will look at the conduct by all Directors in the last 2 years and they will look at why you left it Director-less however it doesn't sound like this will apply here if HMRC don't object to your dissolution strategy.

 

[David A]

Resigning as a Director makes no difference in Liquidation - if anything it would make things worse. The Liquidator will look at the conduct by all Directors in the last 2 years and they will look at why you left it Director-less ...

A perfectly acceptable reason for resigning as Director is that you haven't been paid, nor has the company the means to pay you in the future. Ask any accountant or insolvency practitioner to act for the company for no remuneration and you will get short shrift.

 

[Dave the rave]

A perfectly acceptable reason for resigning as Director is that you haven't been paid, nor has the company the means to pay you in the future. Ask any accountant or insolvency practitioner to act for the company for no remuneration and you will get short shrift.

Would he still be liable to what happened before he resigned. Eg an overdrawn directors loan ?

 

[Scalloway]

Yes he would still be liable for his actions as director. And he would still be liable to repay the loan.

Sent from my HTC One mini using Tapatalk

 

[Lisa Thomas]

A perfectly acceptable reason for resigning as Director is that you haven't been paid, nor has the company the means to pay you in the future. Ask any accountant or insolvency practitioner to act for the company for no remuneration and you will get short shrift.

Once appointed, a Liquidator cannot resign on the grounds that there are insufficient funds to pay their bill.