Struggling to pay back a LTD company tax bill

[adviceneededh3]

Hi,

I've been struggling to pay back huge debts over the years but it's got to the point I can no longer pay them as they currently stand.

I'll try to cut a long story short.
Started an online business as a sole trader.
After x amount of years, turned that business into a limited company.
Received bad advice from an accountant about a way to save on tax.
Entered a tax avoidance scheme where I delay paying the tax owed (not write it off). All perfectly legal at the time.
HMRC changed the rules around this particular scheme the following year or 2 (can't remember when) and the tax accountant who set it up, liquidated his business and was unreachable.
The HMRC then go and send letters to companies that have used the scheme in the past before they changed the rules and basically say you can settle or fight it in court.
I chose to settle as it was causing me an enormous amount of stress and I just wanted it out of my life.
Agreed to pay it back over x amount of years.
about a year later I chose to go back to being a sole trader instead of a limited company because my accountancy bills were getting out of hand and profits weren't as good as they were previously. I had to cut costs somehow.
I finally got to the end of the payment plan and there is a bumper payment left. I was planning on remortgaging the house and using some money to pay this offer when I initially agreed to the plan.
But the company has not been doing well for a while, I've been doing all I can to try and pay this debt but it's been a struggle. The pandemic also happened which increased a lot of things. One being our mortgage repayments etc I had to remortgage twice during this to help pay the payments each month which meant our mortgage bill went up.
I then called the HMRC and agreed to pay pretty much interest only payments for 6 months and then re-evaluate our position as I told them I could not afford the bumper payment at the time but hope that something may turn around during those 6 months.
I have now delayed it 3 times (1.5 years)
I've got to call them again soon but in all honesty things just haven't picked up to a point where I can pay it and I'm just throwing money away I don't have on the interest.
Sinking deeper into debt and hardly any money coming in.
I was making ends meat but now I'm struggling to do that and the job market has been nothing short of diabolical. Basically hear nothing back from anyone and I've been trying for a long time to get something to help out as an extra.

I've looked up if there's much I can do about it as it's a limited company debt.
Some say I might be able to dissolve the company and ask the debt to be stricken off? Seems unlikely the HMRC would allow that from what I have read.
Would they come after me personally even if the business did dissolve or liquidate?

The only assets I have related to the company is a computer and phone which I paid for personally, not the LTD company. I also have a website, social medias, email list etc. Just online business stuff.
Would they take those? I had those before it was a LTD company. I've been a sole trader again now for about 3 years.

Any help would be greatly appreciated. I'm not after any sympathy but I've been trying really hard to get this sorted and it's been so tough, I can't even begin to explain!

 

[Lee Green]

Hi, you've done the right thing in reaching out for advice.

As regards the strike off process, i'm going to suggest that is a non starter. HMRC will undoubtedly object to any strike off application.

Your better bet, if you wish to draw things to a formal conclusion would be to place the company into a Voluntary Liquidation. I, or other IPs on this platform, could assist you with this process.

There is obviously a cost to this, broadly i would assume most of our firms charge a relatively similar fee. If there is limited company assets then you may need to cover this personally.

Any liquidator will then be duty bound to investigate the affairs of the business. Based on other cases I have dealt with, with similar circumstances, there is often grounds for a civil action against the director for having used a tax avoidance scheme.

HMRC equally have powers to issue personal liability notices in such circumstances.

We have typically looked to involve HMRC with any settlement so that it ensures there isn't a further claim against the director in due course by HMRC.

Feel free to contact me if you wish to discuss further.

Lee

 

[adviceneededh3]

Hi, you've done the right thing in reaching out for advice.

As regards the strike off process, i'm going to suggest that is a non starter. HMRC will undoubtedly object to any strike off application.

Your better bet, if you wish to draw things to a formal conclusion would be to place the company into a Voluntary Liquidation. I, or other IPs on this platform, could assist you with this process.

There is obviously a cost to this, broadly i would assume most of our firms charge a relatively similar fee. If there is limited company assets then you may need to cover this personally.

Any liquidator will then be duty bound to investigate the affairs of the business. Based on other cases I have dealt with, with similar circumstances, there is often grounds for a civil action against the director for having used a tax avoidance scheme.

HMRC equally have powers to issue personal liability notices in such circumstances.

We have typically looked to involve HMRC with any settlement so that it ensures there isn't a further claim against the director in due course by HMRC.

Feel free to contact me if you wish to discuss further.

Lee

Hi Lee,

This is what I'm worried about. The fact the debt is due to a tax avoidance scheme, they may try to come after me personally.
In your opinion, in all likelihood, what are the chances they would come after me personally for this sort of thing? Would you have thought likely?

I am struggling financially, so I cannot go down a route that may cost me more money. I've paid about 2/3 of the debt, but cannot pay the remainder. I'm just continuing to pay the minimum for the last 1.5 years and it's just the interest, so the bill is not going down at all.

 

[Paul Kelly ICHYB]

Sorry to hear about your predicament.

Whether HMRC come after you via the business or direct, you will be paying the money back.

Therefore, if you close the business and they come after you, you are no worse off. However, if you close the business and they do not come after you, you are quids in.

I would think the driving force would be the value outstanding.

 

[adviceneededh3]

Sorry to hear about your predicament.

Whether HMRC come after you via the business or direct, you will be paying the money back.

Therefore, if you close the business and they come after you, you are no worse off. However, if you close the business and they do not come after you, you are quids in.

I would think the driving force would be the value outstanding.

Hi,

I've heard that if I try to liquidate the company, the HMRC could block that from happening and keep it open to continue paying the debt or something else and that they may then send me a bill for the legal fees for doing so. Does this sound like something that could happen?

For example if I do just try to liquidate the company and the debt and they disagree and either keep the company open or come after me personally, could they send me a bill for legal fees? I don't want anymore debt. I'm trying to do the opposite and get rid of the debt.

 

[Lee Green]

Hi Lee,

This is what I'm worried about. The fact the debt is due to a tax avoidance scheme, they may try to come after me personally.
In your opinion, in all likelihood, what are the chances they would come after me personally for this sort of thing? Would you have thought likely?

I am struggling financially, so I cannot go down a route that may cost me more money. I've paid about 2/3 of the debt, but cannot pay the remainder. I'm just continuing to pay the minimum for the last 1.5 years and it's just the interest, so the bill is not going down at all.

As the other poster mentioned, clearly an understanding of the numbers might be helpful.

When we deal with matters like this, or collection of director loan accounts, we always have to be mindful of the directors personal financial circumstances and ability to repay. More often than not, we have to be commercial and agree to a partial settlement.

In the similar cases we have dealt with, we ensure that HMRC are party to or in agreement to the settlement so that it ensures the director doesn't end up with a further headache.

If you want a confidential conversation to discuss and are able to disclose more information then feel free to give me a call tomorrow.

Lee

 

[Lee Green]

Hi,

I've heard that if I try to liquidate the company, the HMRC could block that from happening and keep it open to continue paying the debt or something else and that they may then send me a bill for the legal fees for doing so. Does this sound like something that could happen?

For example if I do just try to liquidate the company and the debt and they disagree and either keep the company open or come after me personally, could they send me a bill for legal fees? I don't want anymore debt. I'm trying to do the opposite and get rid of the debt.

HMRC can't block you from putting the company into Liquidation. They can seek to appoint a different Liquidator, if they don't like your choice of Liquidator though.

 

[Lisa Thomas]

How much does the company owe HMRC?

Do you ow the company any money for an overdrawn director loan account?

Subject to those answers (and a few others) then dissolution might actually be the right option for you given the company cannot afford to pay for liquidation.

 

[UK Contractor Accountant]

HMRC changed the rules around this particular scheme the following year or 2 (can't remember when) and the tax accountant who set it up, liquidated his business and was unreachable.

Quelle Surprise! They always do a disappearing act when the proverbial sh***t hits the fan.

Just like all those dodgy umbrella companies structuring employment pay as loans..... nowhere to be seen when HMRC close the scheme down and go after the employees.