Walking the walk with Spongebob

Discussion in 'Insolvency' started by Andy Hunt, Jun 16, 2020.

  1. Andy Hunt

    Andy Hunt UKBF Newcomer Free Member

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    I’ve been reading this forum for a while but always hoped I’d not be in the situation I am in today.

    I’m sole director/shareholder of a Ltd company which is now on its last legs and I think the Spongebob plan is my only option so I am asking for help with the plan. I have not signed any personal guarantees.

    There is about £500 in the business bank account. The company has an outstanding vat return owing £2000 and a suppliers bill is due next week (£1200+vat). Without this supplier I simply cannot continue.

    Projected income during COVID 19 is realistically zero!!

    Company accounts due in November should show dividends paid are covered by retained earnings.

    I took a small dividend of £500/months up until March when everything went COVID crazy.

    Is the company now technically insolvent?

    If I can delay payment of my suppliers bill for a month does this mean I am not yet insolvent? Or should I now just take the bull (spongebob) by the horns and hold on tight ???????

    I’m stressed out and I’d welcome any advice here because I can’t afford professional advice.
     
    Posted: Jun 16, 2020 By: Andy Hunt Member since: Jun 16, 2020
    #1
  2. bovine

    bovine UKBF Ace Free Member

    1,188 254
    Speak to your supplier, explain the situation and see what they say. Ask for an extension. Worst they can do is say no and you are left with no choice but to close.

    Do you think the business will perk up again soon if things start to get back to the new normal? If you don’t, spongebob it. If you do, can you operate at your pre-covid level if the supplier won’t supply you until the debt is settled.

    I’ve been there, it’s stressful but you will get through it.
     
    Posted: Jun 16, 2020 By: bovine Member since: Aug 23, 2007
    #2
  3. Mr D

    Mr D UKBF Legend Free Member

    22,989 2,772
    The money in the account should go between creditors on a pro rata basis.

    The projected income going forward - if that is zero or too little then yes sounds like business is insolvent. Get professional advice from an insolvency practitioner (free ideally) - SpongeBob is not always the sole option though does appear so from the information given.

    If the business has assets besides the cash in bank then that affects things too.

    You will almost certainly not be the only business going under owing a particular creditor. They had better get resigned to it. Remember the company owes the debt not you personally. Do not get talked into making payments the company cannot afford.
     
    Posted: Jun 16, 2020 By: Mr D Member since: Feb 12, 2017
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  4. Andy Hunt

    Andy Hunt UKBF Newcomer Free Member

    4 0
    Thank you for the reply bovine.

    I have drafted a letter to my supplier asking for an extension to my due payment. If the answer is yes then I have some breathing space. I’ve submitted my vat return but delayed payment as allowed by gov guidance. Government rules on lockdown, business closures, social distancing seem to be changing every day so I haven’t a clue what will happen in the future. I’m just confused about at what point do I become insolvent???? My account is a Tide account and they are saying that bounce back loans will be available soon but I’m thinking that might just be digging a bigger hold for myself.
     
    Posted: Jun 16, 2020 By: Andy Hunt Member since: Jun 16, 2020
    #4
  5. Andy Hunt

    Andy Hunt UKBF Newcomer Free Member

    4 0
    This is part of my confusion. Creditors as of now are suppliers bill and VAT. Should I divide the £500 in bank between them on a fair percentage calculation? As for final year accounts, that 500 isn’t enough to pay accountant so corporations tax due is unknown.

    Sorry about all of the “what if”s
     
    Posted: Jun 16, 2020 By: Andy Hunt Member since: Jun 16, 2020
    #5
  6. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

    3,523 448
    The Company is insolvent, albeit for a small sum.

    I would sit tight and ride it out to see if you can trade out of it - nothing will happen overnight.

    If it become obvious that it cannot trade on then dissolution seems to be the best option. You can try and do this yourself, see if HMRC do it (unlikely for the small amount owed) or let Companies House do it for non filing of statutory returns.

    https://www.gov.uk/strike-off-your-company-from-companies-register

    Most IP's will have an initial chat for free.
     
    Posted: Jun 17, 2020 By: Lisa Thomas Member since: Apr 20, 2015
    #6
  7. Andy Hunt

    Andy Hunt UKBF Newcomer Free Member

    4 0
    No hope of recovery now..

    I've managed to raise as much money as possible by selling bits & pieces. I have just paid for final accounts to be made up (half way through company year). Company showing a loss of £1000ish so there is no corporation tax due, although accounts have not been submitted yet.

    £900 in bank
    £2100 vat owed
    £1200 owed to one creditor
    £70 owed to another creditor
    £45 owed to another creditor

    I'm ready to send off the 'spongebob' insolvency letters but I don't know what to do about the £900 in the bank. Shall I pay off the two lesser creditors ? Or leave the £900 in the bank and see what happens?

    Should I submit the final accounts first ?
     
    Posted: Jul 7, 2020 at 3:09 PM By: Andy Hunt Member since: Jun 16, 2020
    #7
  8. RobinBHM

    RobinBHM UKBF Regular Free Member

    322 111
    I did what Spongebob recommends: take the money out and put it in another account, leave it there and see if HMRC investigate.

    I kept HMRC informed -I rang both VAT and PAYE, its best as sending a letter doesnt mean it gets picked up by all departments.

    They never did anything, Companies house did their proposal to strike off and it went through first time.

    I had customer default on a major contract, HMRC was up to date, suppliers mostly current month.
     
    Posted: Jul 7, 2020 at 3:38 PM By: RobinBHM Member since: Apr 14, 2012
    #8
  9. Mr D

    Mr D UKBF Legend Free Member

    22,989 2,772
    Spread the £900 between all creditors pro rata. Don't try paying off any in full, its an illegal preference.

    Leave the money in the bank and eventually the bank freeze the account and some time after that the assets (ie money) is transferred to the Crown Solicitor. Ideally do something before handing it over to them.
     
    Posted: Jul 7, 2020 at 3:52 PM By: Mr D Member since: Feb 12, 2017
    #9
  10. Ian J

    Ian J Factoring Specialist Full Member - Verified Business

    6,066 1,978
    To what end?
     
    Posted: Jul 7, 2020 at 3:56 PM By: Ian J Member since: Nov 6, 2004
    #10
  11. Mr D

    Mr D UKBF Legend Free Member

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    So you sent a cheque to the Crown Solicitor for this company asset you were holding?
     
    Posted: Jul 7, 2020 at 4:04 PM By: Mr D Member since: Feb 12, 2017
    #11
  12. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    Either pay the money out to all creditors pro rata, or leave the funds in there for the Treasury Solicitor/Bona Vacantia for them to pick up post dissolution.
     
    Posted: Jul 7, 2020 at 4:08 PM By: Lisa Thomas Member since: Apr 20, 2015
    #12
  13. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    11,600 2,413
    You cannot pay just to some of the creditors it needs to be to all including HMRC. or none as D states pro rata to the debt owed
    hmrc £2100=£554
    £1200= £316
    £70= £18
    £45= £11
    Total = £899

    Blow the rest on wine and women
     
    Posted: Jul 7, 2020 at 4:14 PM By: Chris Ashdown Member since: Dec 7, 2003
    #13
  14. UK Contractor Accountant

    UK Contractor Accountant UKBF Big Shot Full Member - Verified Business

    4,996 876
    to hide assets away for own self interest -it's tax/debts avoidance SpongeBob style.

    The plan is now out of date and needs to be rewritten with new rules coming in regarding third party tax debts and overdrawn loan account write offs.
     
    Posted: Jul 7, 2020 at 8:09 PM By: UK Contractor Accountant Member since: Sep 18, 2013
    #14
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  15. RobinBHM

    RobinBHM UKBF Regular Free Member

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    as Lisa said: "leave the funds in there for the Treasury Solicitor/Bona Vacantia for them to pick up post dissolution"
     
    Posted: Jul 8, 2020 at 9:57 AM By: RobinBHM Member since: Apr 14, 2012
    #15
  16. RobinBHM

    RobinBHM UKBF Regular Free Member

    322 111
    as Lisa said: "leave the funds in there for the Treasury Solicitor/Bona Vacantia for them to pick up post dissolution"
     
    Posted: Jul 8, 2020 at 9:58 AM By: RobinBHM Member since: Apr 14, 2012
    #16
  17. Mr D

    Mr D UKBF Legend Free Member

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    Bit difficult to leave the funds in there after taking them out. Would require putting them back.
     
    Posted: Jul 8, 2020 at 9:59 AM By: Mr D Member since: Feb 12, 2017
    #17
  18. RobinBHM

    RobinBHM UKBF Regular Free Member

    322 111
    no, I didnt do it for that reason.

    It was less than £1k -I couldve paid some out to all the creditors but one was a preferential creditor, so I wasnt in a poistion to make any decisions what to pay to who.

    I could of course have done the correct thing: appoint a liquidator, who would taken his fee then distributed nothing and cost me £4k to do that.
     
    Posted: Jul 8, 2020 at 10:03 AM By: RobinBHM Member since: Apr 14, 2012
    #18
  19. Mr D

    Mr D UKBF Legend Free Member

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    So what was the reason you were unable to pay to preferential creditor?
     
    Posted: Jul 8, 2020 at 10:05 AM By: Mr D Member since: Feb 12, 2017
    #19
  20. RobinBHM

    RobinBHM UKBF Regular Free Member

    322 111
    it was a dispute over notice period and holiday pay -employee took it to a tribunal.
     
    Posted: Jul 8, 2020 at 10:11 AM By: RobinBHM Member since: Apr 14, 2012
    #20