VAT problem, bad records and disqualification...

[dognation]

Please help with my problem. I'm terrified.

I have provided all the info in point form.

1. I am sole director of two companies. ( company A and company B ).
Company A was formed in 2007, and company B just 7 months ago.

2. I ran into problems with company A, I owe business rates on an industrial property and have a VAT liability of around 20k - 25k.

Company A has never been profitable, I kept putting my own money into it and borrowing for from friends etc...

After having a meeting with accountant because book keeping didnt make sense to me - discovered that there were accounting errors which i did not recognise before and decided to form a new company ( company b ) in order to start fresh from the moment I start trading.

The moment i found errors and realised i might be owing more than what i am making, i stopped trading from company A.

I have some reciepts and papers filed but not all, however was always on time with filing, however my accountant complained to me that she made mistakes due to me not being accurate with my own book keeping.
For example- some of my own money I put in- they treated as a sale etc...
This was even when my bank statements showed that certain transactions originated with me personal bank account.

Anyway, The fact is, there were errors and vat is owed and i needed to stop it trading.

The truth is, I struggle with bi polar disorder and between 2008 and 2011, i had real problems, i lost my flat, moved in with a friend and my brother, had no work and couldnt function due to depression and mood swings.
these have come and gone. i spent time on disability benefit and even hospital and much time with shrinks. during this time i lost control of my life, including my business and deftinately my book keeping. i have only recently learned how to read a balance sheet. im not kidding, i have a problem even adding properly with a calculator, it would take me an entire day to fill in a VAT return when i was ill.

towards the end of 2011, i fixed up and went for book keeping training and gained some clarity again into my life and found stability. I have with my new business company B, an accountant which does everything for me, all i do is sell which is what i am good at.

I have my vat return done for me, and i have every single transaction recorded each day on a spreadsheet. this is how i manage now - but for a long time i lost this control and chaos took over.

At times, i didnt realise i was buying my food for home out of my business debt card. i was using my company debt card for personal use.

3. The new company B, is working very well and the record keeping is good. I have paid my vat up to date.

4. I have stopped trading altogether company A. There is no cash and no assets in the company. there never was, i always sold me stock when i had it and there was never much.

5. I moved company A out of the business property, and the following month moved company B into the same address.
Company A and company B are separate limited companies, I am sole director of both.
They have very different names and do similar things but not quite the same. ( same industry, different services ).

6. Company A left behind a £2000 pound business rates bill which the council have gained a liability for, which means they will send bailiffs.


My fears and questions are:

a) if I am director of both companies - can they go after company B when the want money from company A?

b) will they ban me from being a director because of my vat liability on company A and it being untidy and my past? Thereby closing my other company B down?

c) will the bailiffs come to my home even though company A is not registered to my home address to get business rates money?

d) will the fact that my new company B is located at the same address as my troubled company A cause me problems.

Please help.
I'm looking for an easy way to shut the company down without it effecting my new company or my ability to remain as a director and earn a living.
All i am after is some peace of mind and to keep control with the new business.

I am terrified they will disqualify me from being a director becuase my lack of control meant i have a debt of £20k or so to HMRC.

the new company B turns over around 6k a month and my overhead is around 5 to 6 a month. i pay myself between 1.5k a month to 2k a month so i need it to live!
its not a big business its just myself.


Am i going to be banned from directing a company again?
I have made the changes and got the help i need never to get into a mess again.

Am i in trouble?

 

[kulture]

Take a deep breath. Stop panicking. Stop worrying about the absolute worst possibilities. Lets strip out all the irrelevant things and stick to the basics.

Company A owes lots of money and is insolvent.

Company B makes money and now uses the same address as Company A.

Now to avoid complications and future problems for company B, can you prove that it has taken no assets or stock from Company A? If it has taken assets or stock, has it paid a fair price?

If you can answer the above correctly then Company B has no problems.

The potential problems lie with you and company A.

First the Rates liability. This may lie with company A, or it might lie with YOU PERSONNALY. It depends on whether the lease is in your name or in company A's name. The fact that you have moved company B into the property implies that it is in your name. In which case the debt is yours and the bailiffs can come after you. Critically they can NOT come after any property belonging to company B. This should be made clear to them should the come calling. That said it would be much much better if you could come to some arrangement with the council regarding paying rather than wait for CCJs etc.

IF the lease is in Company A's name, then you in any case have a problem because you have moved company B into the property, and should perhaps be paying company A for the use of its asset.

All the other debts belong to company A. If you search this forum looking for something called the "spongebob plan" then you will see lots of useful advice regarding how to close this down.

In all cases you need to remember that the debt belongs to company A and not you. (excepting perrhaps the rates) You need to remind anyone and everyone of this fact. They will try in on. They will try to harass you and scare you into paying. Keep repeating the mantra, the debt belongs to company a and not me, company a has no money.

Regarding your poor bookeeping and poor accounting etc. It is extremely unlikely that HMRC will go after you personally for this. It is extremely likely that they will monitor company B very very closely. What you have to discus with your accountant, and establish with HMRC, is that company B is definitely separate from company A and not some kind of cheat to avoid the VAT liabilities. HMRC are much more likely to accept your accountant's explanation than when you say it.

One final point, and please do not be offended. you must learn not to give too much detail. When asked questions answer truthfully BUT do not give all the unnecessary details you gave above. It confuses and can mislead.

 

[dognation]

Hi.

Thank you for getting back.

I stopped trading the with the old company and started fresh, now all my accounts are accurate.

The rental ageeement is not in my name, It was in my old company name, but the agreement is now in my new companys name.

My biggest worry is being disqualified due to bad record keeping.

Thanks again- not offended. Thx.

 

[Scalloway]

From what I gather you would be pretty unlikely to be disqualified. Put it down to experience and get on with making your new company a success.

 

[Alan R Price]

Hi.

Thank you for getting back.

I stopped trading the with the old company and started fresh, now all my accounts are accurate.

The rental ageeement is not in my name, It was in my old company name, but the agreement is now in my new companys name.

My biggest worry is being disqualified due to bad record keeping.

Thanks again- not offended. Thx.

Thanks to the other guys who have posted answers above. Just for clarification, I am an insolvency practitioner and here is my two penn'orth.

In strict terms, failure to keep proper accounting records is an offence. It is also, on the face of it, grounds for disqualification if your company goes into liquidation or administration. But as kulture says: "don't panic!" There are numerous points in your favour: prosecutions for failure to keep proper records are extremely rare, and disqualification purely on the same grounds equally so. You have a medical disorder that mitigates your conduct. You have taken steps to rectify the position and now have a company which complies with the rules. It seems you did not act deliberately or recklessly. You invested a considerable amount of your own money in the failed company, which you have now lost. The debts of company A appear to be less than £30,000 (VAT £20-25k and rates £2k).

Unofficially, the Insolvency Service will not look at a disqualification case where the debts are less than £100,000 unless the director's conduct is so bad that it goes beyond the pale. There must have been either deliberate misconduct, or recklessness to a criminal extent; or the case is a matter of public concern.

So in the circumstances you have described, I really think there is little or nothing to worry about. I hope this is helpful.