Spongebob Clarity

Discussion in 'Insolvency' started by Beezencrow 12 Twelve, Sep 15, 2020.

  1. Beezencrow 12 Twelve

    Beezencrow 12 Twelve UKBF Newcomer Free Member

    9 1
    After a great deal of thought, effort and honest reflection on our business my wife and I have decided to execute the Spongebob Plan.
    My main concern is whether or not we can bag together so to speak the outstanding Corporation tax and Two separate quarters of VAT payments?
    Moreover reading through some of the historical threads regarding overdrawn director loan accounts it seems that Spongebob would cover the lot so to speak.
    I’m the first to admit that the company dragged on longer than it was financially viable to do so but Spongebob would allow us to wipe the individual slates clean; make a fresh start and at the same time move forwards with positive mood.
    Without being judgemental could anyone please confirm that the overdrawn directors loan can be bagged up with the two other company debts within Spongebob?
    Furthermore we maxed out on the business bank account overdraft, £17000 and business credit card approx £9000; I assume that not having any personal guarantor attached to either then Spongebob would effectively cover the lot.
    All I’m looking for is a straight honest bit of clarity without judgement please.
    We’ve worked hard for lots of years and just simply want to move forward.
    Very many thanks in anticipation of any advice/clarity and help moving forward.
     
    Posted: Sep 15, 2020 By: Beezencrow 12 Twelve Member since: Sep 15, 2020
    #1
  2. Mr D

    Mr D UKBF Legend Free Member

    25,347 3,085
    Yes all business debts are wiped.

    Whether SpongeBob plan is relevant may come up, the company has at least one asset.

    However if the overdrawn directors loan account is not repaid then you declare the income on your personal tax return as untaxed income.
    That tax is personal not company.
     
    Posted: Sep 15, 2020 By: Mr D Member since: Feb 12, 2017
    #2
  3. Adam93

    Adam93 UKBF Regular Free Member

    374 81
    The creditors can wind-up the company, meaning you would have to repay the overdrawn directors loan account. If the debts are high, this is a possibility.

    if the company is dissolved, then any overdrawn directors loan is taxable and needs to be declared on your personal tax return.

    I would double check that there is no personal guarantee on the bank overdraft and credit card. I would be surprised if there isn’t one.

    The spongebob plan is designed for companies with no assets. As the company has an asset (overdrawn directors loan) it’s not designed for this. I would advise seeking advice from an insolvency practitioner.
     
    Posted: Sep 15, 2020 By: Adam93 Member since: Jan 18, 2018
    #3
  4. KAC

    KAC UKBF Ace Free Member

    1,316 305
    As has been said, the plan was not intended to cover cases such as your company.

    You didn't say how big were the directors' loans? Do you have any personal assets that would be available to repay those loans?

    Similarly you haven't identified the amount due to HMRC.

    Did the company have any assets and, if so, what has happened to them?
     
    Posted: Sep 15, 2020 By: KAC Member since: May 7, 2017
    #4
  5. JEREMY HAWKE

    JEREMY HAWKE UKBF Legend Full Member

    5,288 1,845
    I think you are very much mistaken It is highly unlikly that you did not PG the overdraft and card The banks are just not that dumb and I think you would be personally liable for this sum

    I dont think this is a Bob plan job . It is a job for a proper IP
     
    Posted: Sep 15, 2020 By: JEREMY HAWKE Member since: Mar 4, 2008
    #5
  6. Ian J

    Ian J Factoring Specialist Full Member - Verified Business

    6,232 2,073
    Definitely not. The so called Songebob plan is only relevant to companies that have no assets. Your company does have assets in the form of outstanding debtors in the form of directors loans
     
    Posted: Sep 16, 2020 By: Ian J Member since: Nov 6, 2004
    #6
  7. Beezencrow 12 Twelve

    Beezencrow 12 Twelve UKBF Newcomer Free Member

    9 1
    Many many thanks for all your replies; Ian J and the other guys,
    I’ve realised that I haven’t been clear at the beginning of the thread
    My wife and I did apply to Company House online for dissolution I think it’s called and this did go through in July:
    Spongebob I suppose has already been executed because quite frankly we didn’t have the money for the next packet of fags let alone the means to pay an insolvency practitioner so we were completely forced into effectively Spongebob bing the company.
    I’m still completely confused by the overdrawn director loan issue,
    If the company is dissolved then surely the director loan is dead! Approximate figure was £25000 mainly due to huge downturn and bad luck.
    Please advise further as we are confused
    Thanks
     
    Posted: Sep 16, 2020 By: Beezencrow 12 Twelve Member since: Sep 15, 2020
    #7
  8. Beezencrow 12 Twelve

    Beezencrow 12 Twelve UKBF Newcomer Free Member

    9 1
    Sorry forgot to further add that no final accounts were completed due to no means of paying the accountant so the director loan figure is a bit of a guess.
    Santander have not approached us for the money owed through the business bank account overdrafts and credit card,
    I have absolutely no recollection of making any personal guarantor agreement so surely it’s gone at the point of dissolution?
     
    Posted: Sep 16, 2020 By: Beezencrow 12 Twelve Member since: Sep 15, 2020
    #8
  9. Mr D

    Mr D UKBF Legend Free Member

    25,347 3,085
    If company already dissolved then no need for SpongeBob plan.

    The directors loan account you inform HMRC of as untaxed income as it's not been accounted for as income up to this point.
     
    Posted: Sep 16, 2020 By: Mr D Member since: Feb 12, 2017
    #9
  10. JeremySilva

    JeremySilva UKBF Newcomer Full Member

    24 5
    If Santander have a PG the dissolution of the company won't prevent them calling on it. If they do have a PG they'll pursue you into bankruptcy if they think it's worth their while.

    This may not be relevant:
    Of course banks have recently been handing out the Bounce Back loans which are unsecured so we'll be getting used to seeing larger unsecured bank lending than normal. The BBLs were self-certified and HMRC may look into whether the company was eligible and the funds were used appropriately. If not, that's something they may look to hold the directors liable for. If they had to restore the company to do that they could do so. Generally that's fairly rare but these aren't normal times.
     
    Posted: Sep 16, 2020 By: JeremySilva Member since: Jul 14, 2020
    #10
  11. Beezencrow 12 Twelve

    Beezencrow 12 Twelve UKBF Newcomer Free Member

    9 1
    Thanks again for the responses to my questions
    Personal bankruptcy may be the best option
    We live in property owned by my wife’s step daughter and there’s already equity release on the property so I assume Santander couldn’t touch this,
     
    Posted: Sep 16, 2020 By: Beezencrow 12 Twelve Member since: Sep 15, 2020
    #11
  12. Ian J

    Ian J Factoring Specialist Full Member - Verified Business

    6,232 2,073
    The overdrawn directors loan is dead as far as the company is concerned but it is still undeclared income that HMRC need to know about.

    Your choices are either to declare it as income and pay the tax or to "forget" to declare it and risk being caught by HMRC and being done for fraud
     
    Posted: Sep 16, 2020 By: Ian J Member since: Nov 6, 2004
    #12
  13. UK Contractor Accountant

    UK Contractor Accountant UKBF Legend Full Member - Verified Business

    5,130 908
    Did you actually send a copy of the dissolution request to all know creditors of the company so that had an opportunity to object to the dissolution?
     
    Posted: Sep 16, 2020 By: UK Contractor Accountant Member since: Sep 18, 2013
    #13
  14. Beezencrow 12 Twelve

    Beezencrow 12 Twelve UKBF Newcomer Free Member

    9 1
    Yes all relevant notifications sent as advised by Spongebob
    I think personal bankruptcy would cover everything then on the basis of what Ian J has stated and eliminate entirely any fraud on our part,
    As I say my wife’s step daughter owns the house so I assume HMRC can’t touch this one,
    Thanks to everyone
     
    Posted: Sep 16, 2020 By: Beezencrow 12 Twelve Member since: Sep 15, 2020
    #14
  15. JeremySilva

    JeremySilva UKBF Newcomer Full Member

    24 5
    A bankruptcy trustee would look to see if you've given away any assets (e.g. properties) over the last 5 years. If you did those asset transfers could be unwound.
     
    Posted: Sep 16, 2020 By: JeremySilva Member since: Jul 14, 2020
    #15
  16. Beezencrow 12 Twelve

    Beezencrow 12 Twelve UKBF Newcomer Free Member

    9 1
    We’ve never owned property
    My wife’s step daughter owns the house which we rent from her so again I assume we’re clear on this one
     
    Posted: Sep 16, 2020 By: Beezencrow 12 Twelve Member since: Sep 15, 2020
    #16
  17. Beezencrow 12 Twelve

    Beezencrow 12 Twelve UKBF Newcomer Free Member

    9 1
    My only concern is whether personal bankruptcy would stop us claiming housing benefit? Sorry different forum
     
    Posted: Sep 16, 2020 By: Beezencrow 12 Twelve Member since: Sep 15, 2020
    #17
  18. JeremySilva

    JeremySilva UKBF Newcomer Full Member

    24 5
    Get advice before declaring bankruptcy. It's not the only option and may not be appropriate in your circumstances.
     
    Posted: Sep 16, 2020 By: JeremySilva Member since: Jul 14, 2020
    #18
  19. UK Contractor Accountant

    UK Contractor Accountant UKBF Legend Full Member - Verified Business

    5,130 908
    not sure why HMRC/Companies House do not make it part of the Strike Off application form- declaration that any outstanding Director Loan to the company be declared as distribution from the company on your personal tax return if strike off is granted.
     
    Posted: Sep 16, 2020 By: UK Contractor Accountant Member since: Sep 18, 2013
    #19
  20. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

    3,602 468
    I'm not sure why you feel Bankruptcy is necessary unless the tax on your DLA drawings is unmanageable and/or you have other personal debts you cannot pay?
     
    Posted: Sep 16, 2020 By: Lisa Thomas Member since: Apr 20, 2015
    #20