Starting a New Company While Existing Company Becomes Insolvent

Hello, looking for advice please.

I am the sole director of a limited company that has been trading for 10 years.
Due to a number of personal reasons (including the break up of my marriage and child custody court battles), I've let things slip over the past couple of years. I really need a fresh start!

My existing company is currently solvent in the eyes of the law but in reality has some looming debts that I will be unable to pay:
- I have £6,000 in the bank.
- My next accounts are due on 29th of February.
- My next Confirmation Statement is due on 27th of February.
- I pay myself a salary of £2,500 per month and submit this via payroll RTI software.
- I ceased trading in October, so no trading income to the bank account since then, other than the sale of 2 minibuses (one in October '19 and one in February '20)*.
- I owe Companies House £4,500 in unpaid fines for year on year late filing. It's with their debt management company.
- I haven't submitted a VAT return in over a year, so there are 4 outstanding. However, due to the nature of my business, my returns are always repayments. The services I have provided are 'zero rated' so I am always reclaiming the VAT that I have paid out. HMRC have however estimated that I owe them £3,000. In reality, there will be repayments due to me of around £10,000*.
- *Not including the £10,000 HMRC would have repaid to me, I will owe them around £10,000 in VAT that I collected on the minibus sales so that bill will more or less cancel itself out.
- I have outstanding PAYE payments totalling £6,500.
- Due to not completing last year's Corporation Tax return, HMRC have estimated that I owe them £2,500. My last year's accounts show that I didn't make a profit but HMRC don't know this yet.
- There are a couple of contracts that my company has entered into, including outsourced HR services at £80/month, tied into a recently renewed 3 year contract. I also have another 3 year contract with a vehicle tracking company which costs £25/month.
- I no longer have any employees although one of the 'redundants' is taking me to an Employment Tribunal for unfair dismissal. He believes I am still trading when I am not. He also believes I haven't calculated his redundancy correctly when I have, and have paid all monies owed. Still, an ET looms.

I do have an accountant.
But my accountant is waiting for me to provide him with all invoices and bank statements from the previous year in order to do a catch up. I don't have this readily available because they are all between my old office and old house, which are in a different part of the UK from where I now live. He also wants to go back over my previous 7 years of VAT returns and make corrections to my mistakes. I did these all myself and it appears that I have incorrectly reclaimed for some VAT, probably to the tune of £5,000. I only appointed him a couple of years ago so he's been tasked with trying to sort out my messy situation. HMRC are completely unaware of these past mistakes.

Everything feels like its in such a mess so I'm feeling very strongly that I would like to just start again under a new company name. As it happens, I'm going to be doing something different from what I was doing before anyway so it makes sense on a number of fronts. I also now reside in England but my business was incorporated in Scotland and it's not possible to move across jurisdictions.

Given that my next Confirmation Statement and Annual Accounts are due at the end of the month, should I just leave them unsubmitted and wait for CH to wind the company up?
Presumably HMRC will object to the winding up and seek to liquidate?
Is it worth my while trying to do all the catching up with my accountant or can I just wash my hands with this?

I am about to launch a new company and was going to incorporate the new company in the next few days. Will my above scenario be a barrier to this happening? Could I be struck off as a director?

Thanks!

 

Yes you can start a new company.
Not doing confirmation statement will eventually cause companies house to start dissolving the company. Its usually HMRC who object - so could be several months before company is dissolved.

Whether HMRC or anyone seeks to wind the company up.... for low numbers they do not appear likely to do so.

To be struck off as a director you'd usually need someone to investigate the company - the official receiver or an insolvency practitioner. Or to be banned by going bankrupt.

 

Thanks.

Do you think I should just allow the slow winding up of the company initiated by CH, or would it be better if I seek to dissolve the company myself to speed the process up?

Is there any benefit to me doing all the above tidying up when I don't intend to trade further with this company anyway?

Can I still pay myself my salary payment at the end of this month?

Do I require an IP? I of course, don't want to pay for one if there is no requirement.
I was looking at the Spongebob method. Would this be appropriate in my circumstances?

 

Be quicker for you to complete the DS01 form and send it off.
Not really much point in tidying up, company still cannot pay.

No idea about the salary.

You can get advice from an IP usually without any signing up, cost etc.
There are some good ones around - some on here are well respected by many posters or they may suggest good ones they know.

SpongeBob appears to be for those unable to afford an insolvency practitioner to dissolve the company nice and neat. Apparently saves a lot of stress if you do use one - the creditors usually keep chasing for the more informal methods used like spongebob plan. Until the company is dissolved.
Had one creditor who tried to get some payment on account towards their debt - which just happened to clear their debt entirely in a few months. But you cannot show preference to one creditor.

 

Bearing in mind that you have £6,000 in the bank, I would speak to an IP as that will give you a clean break. Do you have an overdrawn director's loan. If not, IP will deal with creditors.

You can just start your new company in a different name and not worry about old CH/HMRC/VAT filings. Just make sure that you have learnt your lesson and keep everything up to date with the new company.

Speak to @Lisa Thomas or @Gavin Bates for better advice

 

I do currently have £6,000 in the bank but I was hoping to pay my salary at the end of the month and I still have some other bills to pay to my accountant, office rent, etc.

Are the benefits of using an IP worth the £5k or so that they will charge?
If it's possible, and legally acceptable for me to wind up without one, I'm struggling to see what I would gain by using one. Am I missing something here?

Lessons have definitely been learnt. But the overriding feeling I have is that it will be better in the long run for both myself, and the Treasury if I have this fresh start and I can be fully productive without being bogged down with all this mess.

 

Do not prefer one creditor over another. That can come back to bite you if you are investigated.
Spread your money pro rata between debts - as a director you are working in the best interests of your creditors. Not the best interests of yourself.

 

I'm not sure what you mean here. Am I a creditor for my salary?
As I haven't yet had strike-off proceedings initiated against me, is paying my ongoing bills as normal not the right thing to do, ie my accountant's monthly fee, rent, etc?

 

you ceased trading in October.

You havent been due salary for several months!

 

Sure, so long as paying all creditors in full or paying each the same pro rata share of money.
Eg 10k of debt and 1k of cash each would get 10 percent of bill paid.

If you prefer some creditors over others those others can become very annoyed, besides failing in your duty to act on creditors behalf.

 

But did he? He has sold at least one minibus since then so the company is still active even if not actively pursuing work.

Why not? In the general case, can you not continue paying salary if there's no income, but money in the bank?

 

This!

Combine that with what could be regarded as VAT fraud by HMRC and you really should not be running any kind of company any time soon.

A tale of woe about custody battles and marriage break-ups is truly irrelevant. You claimed VAT back and paid yourself a wage when there were no legal grounds for so doing. If you seriously think that it was acceptable behaviour then you might like to seriously reconsider your fitness to run any kind of commercial enterprise.

 

I sold two minibuses, most recently in February.
Sure, I haven't taken any bookings since October but given the vehicle sales, have I actually ceased trading?

 

I think you're being unfairly harsh and I'm certainly not looking for your sympathy. But my personal situation was relevant to the background of this, not to admonish myself in the eyes of the law but to paint the full picture in here so I can get appropriate advice. Had I not provided any background, it would just look like I was a scammer, which I'm not.

I understand my responsibilities. I was considering making an offer to HMRC to personally guarantee payment of all unpaid tax from my new business.
Does that make me more fit to run any kind of commercial enterprise?
Nobody wins if I just give up on my business aspirations, not least the Treasury.

 

It depends on what your business was. If you were in the business of the hire of minibuses then you ceased trading when you fulfilled your last job back in October but if your business was the sale of minibuses then you would have been deemed to have ceased trading when you sold off the last of your stock in trade

 

Okay thanks. Yes my business was hiring out the minibuses with drivers so trading did cease in October then.

 

Why? What if the right job just didn't come along?

What if he took an extended holiday and took no bookings? Does that mean he ceased trading?

At best I think it's a grey area. Selling off assets could still be trading.

 

I have in the past (up to about ten years ago) given people and companies advice and help in such situations, but almost every time, I discovered that those involved had either (a) been burying their heads in the sand and just not facing up to reality, or (b) were using insolvency as a way to escape their responsibilities.

I have entered houses where there were boxes of unopened letters under the bed or stairs, people who had appointments to visit a board of expert financial councilors to help them out of their predicament who just didn't turn up, people who start to cry if you insist that they read contracts or declarations of insolvency before signing them - I could go on!

I am reminded of the words of WC Fields: "When I was a struggling actor trying to get a break in this business, I swore that if I ever become rich and successful, I shall turn around and reach down and help my fellow struggling actor. Well, now that I am rich and successful, I have reached a conclusion. F**k 'em!"

Considering that you thought that it was both right and proper to pay yourself £30,000 p.a. salary from a company that is losing money and that you were driving into insolvency, I would have thought that the Treasury and society in general would be best served by you NOT repeating this exercise!

I am sorry for you and your predicament, but it is 100% of your own doing.

 

Wow, you really are a piece of work aren't you?
The situation you describe couldn't be further from the truth with me. You've made a whole lot of assumptions and are offering nothing constructive whatsoever. You're clearly just a keyboard warrior who can't resist kicking someone when they are already down.
Seriously though, I asked for advice and you've done nothing but put me down.

You're not sorry at all, you're just full of yourself.
My company was perfectly solvent until I stopped taking bookings in October.
For ten years I have been employing people and generating tax for the Treasury.
Okay, things have slipped recently but I'm looking to make things right again.
But frankly, I think you should just jog on and bother someone else unless you have anything constructive to add.

 

Realistically the time the company stopped working could be considered the time you left the payroll?

No one considers the years spent paying tax, its irrelevant.