Unable to pay corporation tax

[Tilly7459]

As a long standing Ltd company and due to heath things not going well. My wife and myself are directors. We have always paid CT on time every year. However this time due to being older and health issues we are not as busy. I have a CT liability for 23/24 of approx £4500. Can I close my company and the CT will eventually get written off ? We have one oldish vehicle worth around £2000 and a laptop. No other assets or debts. Thank you in advance.

 

[UK Contractor Accountant]

Have you taken to much out of the company for 23/24 which may explain why there is not sufficient reserves to pay the corporation tax?

 

[UK Contractor Accountant]

You can close the company but will need to pay in for the market value of the assets first and pay off what you can of the ct debt.

 

[Porky]

@Tilly7459
Read the Sponge Bob plan

Ironic but the debt isn’t big enough to probably warrant using an IP as they generally want £5k min fees. But if you did, they would put the limited company into administration and try and recover what they can from the assets. If the car is in the company name you would probably offer a couple of hundred quid for it and £20 for the old lap top. The tax debt written off.

Because it’s not viable to appoint an IP and clearly the business is insolvent as it sounds like trade took a nose dive since your last filings due to ill health then the sponge Bob plan could work. In your circumstances I would probably give it a go, you can’t pay what you don’t have!

 

[Lisa Thomas]

Have you taken to much out of the company for 23/24 which may explain why there is not sufficient reserves to pay the corporation tax?

Tilly

This is very important - have you taken any director loan account ("DLA") drawings out from the company? If so you may be debtors which means you owe the money back.

I would check this with the accountants before you take any further action.

Dissolution of liquidation may be the options to explore, subject to clarifying the DLA position.

 

[Lisa Thomas]

@Tilly7459
Read the Sponge Bob plan

Ironic but the debt isn’t big enough to probably warrant using an IP as they generally want £5k min fees. But if you did, they would put the limited company into administration and try and recover what they can from the assets. If the car is in the company name you would probably offer a couple of hundred quid for it and £20 for the old lap top. The tax debt written off.

Because it’s not viable to appoint an IP and clearly the business is insolvent as it sounds like trade took a nose dive since your last filings due to ill health then the sponge Bob plan could work. In your circumstances I would probably give it a go, you can’t pay what you don’t have!

Administration would not be appropriate in these circumstances. Liquidation might be, although as you have identified it might not be appropriate given the small level of debt and lack of assets to cover the cost. A compulsory liquidation costs from £3k.

 

[Tilly7459]

Have you taken to much out of the company for 23/24 which may explain why there is not sufficient reserves to pay the corporation tax?

 

[Tilly7459]

Thank you for all your replies. The dla is nil so am thinking “ if I simply don’t pay the ct it will go away” basic but possible ? I’m state pension age in a few weeks too

 

[Bobbo]

Thank you for all your replies. The dla is nil so am thinking “ if I simply don’t pay the ct it will go away” basic but possible ? I’m state pension age in a few weeks too

If not DLA, where did the profit (on which the corp tax is due) go?

 

[fisicx]

I thought the CT is calculated from how much profit you made. Which means at some point there was enough to pay HMRC.

If there isn't does this mean the directors have taken too much out the company? Would they be required to pat it back?

 

[Lisa Thomas]

I thought the CT is calculated from how much profit you made. Which means at some point there was enough to pay HMRC.

If there isn't does this mean the directors have taken too much out the company? Would they be required to pat it back?

Possibly they have taken too much out of the company, or it may have been spent on other things. If they have taken too much out (i.e an unlawful dividend or an overdrawn Director Loan Account) then yes, they may have to pay that money back.

 

[Lisa Thomas]

Thank you for all your replies. The dla is nil so am thinking “ if I simply don’t pay the ct it will go away” basic but possible ? I’m state pension age in a few weeks too

It won't necessarily 'go away'. HMRC may choose to send court enforcement offices ('bailiffs') to try and recover assets to cover the debt, or they could liquidate the company in court, but this is unlikely given the low level of debt.

It is likely that the company will eventually be struck off by Companies House for non filing of statutory returns, but there is a small risk the Insolvency Service will investigate why the insolvent company was not first liquidated.

As directors you really should be taking proper advice.

Seems to me if there is definitely no outstanding DLA then dissolution will be the best option but you should ensure you follow the procedure properly

.https://www.gov.uk/government/publications/company-strike-off-dissolution-and-restoration?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery&utm

I know a couple of parties who can help with that for a small fee.

 

[Elliot Green]

HMRC debt is not written off. It might not get paid by the company and that might be what you mean but it is not written off.

The point is explained and how it might be addressed in this guide:

Can You Write Off HMRC Debts? - Oliver Elliot

Can you write off HMRC Debts? If you have difficulty paying HMRC then it is possible to work with HMRC to clear the debt.

www.oliverelliot.co.uk

You can contact me if you need further assistance at my below details.