Starting Spongebob Plan Contractor

[SAC Consulting]

Hi, My LTD Company is currently on it's knees with about 10,000 CT and 5,000 VAT bill. I have decided to start Spongebob Plan, I currently work as a Contractor but am starting with an umbrella company tomorrow. I have prepared the letters to send out and have a few questions;

1/ Should I resign as Company Director?
2/ Should i de-register for VAT?
3/ Should I close my Company bank account (no overdraft)?
4/ I only owe to VAT and HMRC, where do I find addresses to send to?
5/ Should I wait 3 months to send DS01 to Companies House?
6/ My company is registered at my accountant address, I cannot afford to pay them any longer should I tell them?
7/ Is there anything else I should do?

Many thanks

 

[john1989]

To have a £10k CT bill, you've made reasonable profits. What has happened to those profits?

 

[SAC Consulting]

I was off with Prostate cancer and had to use them to live on.

 

[UK Contractor Accountant]

Have a read from the sister site Accounting Web
Striking off a company: Get the details right - updated


23 Nov 2011 / By Natalie Brandweiner

One of the more frequent subjects asked under “Any Answers” is the procedure for striking off a company. Jennifer Adams revisits her article under this heading originally written in November 2011, detailing the procedure that needs to be followed and the tax implications thereon.

When to use
The “Striking off” regulations are to be found under Companies Act 2006 (CA 2006) Part 31:-

“Dissolution and restoration to the register” which permits the striking off of a company in two specific instances:

1. CA 2006 s1003 - gives the directors the right to apply for the company to be ‘struck off’. There is a three-month grace period when the procedure cannot be used if, prior to application, the company changed its name, traded, disposed of property or rights or commenced insolvency proceedings. The majority of directors must agree to the closure.
2. CA 2006 s1000 - gives the Company Registrar the legal right to strike off a company if he has reason to believe it is no longer in business. Proof will be in the form of failure to submit accounts and/or non response to letters sent to the company’s registered office.

Procedure – director’s strike off

• Convene a board meeting and/or arrange for the board to pass an (ordinary) resolution in writing to apply for the company to be ‘struck off’. Minute that the company has paid or will pay all of its outstanding debts or obligations
• If necessary, shareholders need to approve a special resolution recording any reduction in share capital (see ‘Bona Vacantia’ and ‘HMRC position’ section below); all directors to sign a solvency statement (dated no more than 15 days before the resolution is passed). Send a copy of the resolution within 15 days of being passed to Companies House plus solvency statement, statement of capital showing the changes and a director’s statement confirming the validity of the solvency statement; the resolution takes affect when registered
• Advise HMRC of strike off by submitting a final set of accounts, computations and CT600 with letters confirming the situation and undertakings of both shareholders and directors. If the directors are the main/only shareholders only one letter is necessary but the signatories should have both ‘director’ and ‘shareholder’ written under their names as appropriate. The company does not have to wait for a response from HMRC (although it may be advisable to do so) before paying all liabilities, distributing remaining assets to shareholders
• Deregister for VAT, if relevant
• Submitting completed form DS01 (plus £10 filing fee) to Companies House signed by all directors (or the majority if there are three or more). Paper form only
• Within seven days of submission send a copy of the DS01 form to all interested parties (e.g employees, creditors, manager of company pension fund etc)
• On receipt of form DS01 the Registrar will publish a notice in ‘The Gazette’ inviting objections as to why the company should not be ‘struck off’
• If no objections within three months of publication (two months as from 15 October 2015) a further notice is published confirming that the company has been dissolved. Per Small Business, Enterprise and Employment Act 2015 s 103
• The directors can halt the dissolution process by submitting form DS02 to Companies House. Detail from Companies House.

Bona Vacantia

There is a company law problem in that if a company returns share capital to shareholders without going through going through the process of a formal winding up then the distribution is illegal under CA 2006 s 829(2) as a ‘distribution’ does not include ‘the repayment of paid-up share capital’, or ‘assets to shareholders on winding up’. Instead, any such assets automatically pass to the Crown under the doctrine of Bona Vacantia (property without a legal owner). Liabilities of a company do not pass on dissolution - they are normally cancelled.

However, the Treasury Solicitor has confirmed that the Treasury will not seek to confiscate any share capital paid out prior to dissolution whatever amount is distributed, whether in property or cash. The right to Bona Vacantia has not ceased - it is just that the Treasury Solicitor will not be collecting. Technically the special resolution to reduce the share capital prior to distribution is still necessary however, even where the legal formalities are not undertaken the Treasury will not seek to recover.

The reason for this stance is because CA 2006 s642 to 644 permits a private company to reduce its share capital and distribute lawfully simply by passing a special resolution supported by a solvency statement.

Govt publication re Bona Vacantia

HMRC position

In comparison with a company that has been liquidated, a company that has been ‘struck off’ can be restored to the Register at a later date e.g. if a claim for unpaid tax was later made against the company.

Whether HMRC will pursue any tax owing will obviously be dependent upon:

• the amount owing,
• the likelihood that they will be able to prove that the alleged debt is owing,
• whether they can establish that monies are owed to the company by other parties (especially directors, both current and former), and whether collection of those debts would result in HMRC being paid from those monies

 

[Lisa Thomas]

Hi - Sorry to hear you've been ill. How were your drawings accounted - through PAYE, dividends or Directors Loan Account?

 

[SAC Consulting]

Hi Lisa,

It was a Directors loan.

 

[Lisa Thomas]

How much do you owe?

 

[SAC Consulting]

I owe £5,000 on DL and CT is £10,000 and VAT £5,000.

 

[Lisa Thomas]

If you want closure and certainty you could do a deal with an IP to Liquidate the Company by paying the DLA back in installments. Alternatively you can just wait and see if HMRC Liquidate then and if that does happen wait for the Official Receiver (who will be the initial Liquidator) to potentially pursue you for the DLA.

 

[SAC Consulting]

Thank you Lisa, no funds for an IP i'm afraid.

 

[Lisa Thomas]

Understood just be aware that it could be called in if HMRC Liquidate.

 

[UK Contractor Accountant]

You owe taxes £15K and your DLA is £5K - what does the missing £10K relate to?

I suspect that your DLA is £15K if you have no money in the bank and no fixed assets.

 

[SAC Consulting]

You are correct Lisa I didn't understand the question. What I would like to know is an answer to the questions at the start of the thread as follows as I feel I have no option but to go down the spongebob route;

1/ Should I resign as Company Director?
2/ Should i de-register for VAT?
3/ Should I close my Company bank account (no overdraft)?
4/ I only owe to VAT and HMRC, where do I find addresses to send to?
5/ Should I wait 3 months to send DS01 to Companies House?
6/ My company is registered at my accountant address, I cannot afford to pay them any longer should I tell them?
7/ Is there anything else I should do?

 

[SAC Consulting]

I have 2 letters from HMRC Corporation Tax owed is £9446.69 and VAT is £2395.80. Directors Loan on those accounts was £8865. My accounts were last filed on 30th April covering period up to 31/7/2014. I am not due to send accounts again until 30 April 2016, I got this info from Companies House website.I have no funds to pay accountant for anything else and do not have final accounts. Please could somebody help with my questions above also as I need to make sure i am doing this right? Will I be chased for the DL? With regards to the business as they are the last accounts filed and I have no accountant to do anything from 1st Aug 2014 what will happen about that?

 

[StevensOnln1]

1. If you resign you will not be able to take any further actions relating to the company or apply for it to be struck off.
2. No point if you are going to apply for the company to be struck off.
3. If there are no outstanding debts owed to the company then you may as well close the bank account to avoid incurring bank charges.
4. Check the latest VAT and Corp Tax letters and send to the offices that issued them.
5. If the company hasn't traded for more than 3 months you can send the DS01 now.
6. It would be courteous to inform your accountant and ask them not to carry out any more chargeable work due to the company having ceased trading with no means to pay for their services.

You can only be pursued for the overdrawn directors loan if the company is placed into liquidation. This is unlikely to happen given the amounts involved. If you inform HMRC of your circumstances when sending the DS01 copies, hopefully it will be read by someone with compassion who won't object to the company being struck off.

 

[SAC Consulting]

Many thanks Steven for your advice, do you think they will pursue me for final accounts?

 

[StevensOnln1]

They might write back asking for them, but you have no obligation to spend your own personal money on having the accounts done.

 

[SAC Consulting]

One more question, what address should I put on the letter? My company is registered at my accountants address, should I just put my home address as all correspondence on CT and VAT have been sent to my home address.

 

[StevensOnln1]

I'd give your home address as your accountant is unlikely to forward any post for your company if you're no longer paying them.

 

[SAC Consulting]

Thanks for being so helpful.

 

[Lisa Thomas]

I understand HMRC might object to strike off if accs not filed. I guess its a case of seeing what comes out in the wash.

 

[UK Contractor Accountant]

They will object multiple times - until at least past July 16 which will be filing deadline date for the July 15 year end Corporation Tax Return.

 

[SAC Consulting]

Hello,
I will be sending DS01 on 9th January but I keep getting letters from a debt collection agency called Advantis. The latest one reads as follows.

This is the third letter written to you in relation to the unpaid debt that you owe to HMRC. This will be your final opportunity to resolve this matter with us.
You appear intent on ignoring this matter and hope it will disappear. As we have advised in our previous letters HMRC can take further action if you do not pay the debt in full or agree realistic payment terms with us.

Failure to contact us to arrange may lead us to returning your account to HMRC at which point they may consider commencing enforcement action against you which may include;

Legal proceedings being commenced.
This may involve a claim being issued through the court for your debt plus additional legal fees and costs. If a judgement is awarded against you, you may find it difficult to obtain a bank account or obtain credit.

If a county court judgement remains unpaid, enforcement action may be commenced, this could include;

A charge could be secured against your property.
A bailiff appointment to remove and sell goods from your property.

A visit from HMRC to seize goods.


Unquote

1/ I have already sent spongebob to Advantis.
2/ I don't own my own property.
3/ This is debt of company and not mine.

Should I send spongebob letter again?

I already sent it to them twice.

Thanks for your advice.

 

[StevensOnln1]

No harm in sending the Spongebob letter again but I doubt they will take any notice.

 

[SAC Consulting]

Yes they don't seem to take a blind bit of notice! Should I be worried/concerned?

 

[StevensOnln1]

I wouldn't worry about it. They can't take any action against you personally unless they go through a whole lot of expense and bother to wind up the company.