HMRC issue - LTD CO
Discussion
Friend bought small a LTD company last year and has had a visit from HMRC recently, they are not happy with VAT not charged/declaired from 3 years before.
If they issue a fine who has to pay? the new owner, the last owner or the business.
My friend bought it without any paperwork that says about past debts/liabilities.
PAULJ5555 said:
Friend bought small a LTD company last year
From that statement I assume you mean they bought the shares in the company. If so the company continued as before with the same VAT number and owes the debt. So the company will have to pay and your friend the shareholder will suffer as a result.
If your friend did not buy the shares, but bought the stock and assets then that is a different story. However that would have involved a new VAT registration unless your friend was utterly stupid in requesting to take over the old VAT number.
PF62 said:
PAULJ5555 said:
Friend bought small a LTD company last year
From that statement I assume you mean they bought the shares in the company. If so the company continued as before with the same VAT number and owes the debt. So the company will have to pay and your friend the shareholder will suffer as a result.
If your friend did not buy the shares, but bought the stock and assets then that is a different story. However that would have involved a new VAT registration unless your friend was utterly stupid in requesting to take over the old VAT number.
The company will owe any incorrect underpaid taxes. If this tax liability was not shown correctly in the accounts prepared by the previous owner - or the previous owner failed to alert the new owner that there was any sort of ongoing tax dispute, then the new owner would have a case against the previous owners.
But, the debt belongs to the company and it is the company that will have to pay it.
Of course, the new owner may want to challenge HMRC as to whether their estimation of any underpaid taxes is correct (HMRC doesn't always get it right) so the new owner should find out precisely how and why HMRC thinks there is an underpaid tax liability and how they have calculated this liability.
I presume the new owner has an accountant?
But, the debt belongs to the company and it is the company that will have to pay it.
Of course, the new owner may want to challenge HMRC as to whether their estimation of any underpaid taxes is correct (HMRC doesn't always get it right) so the new owner should find out precisely how and why HMRC thinks there is an underpaid tax liability and how they have calculated this liability.
I presume the new owner has an accountant?
breadvan said:
Surely there must be a SPA (share purchase agreement)? This will/should include a warranty from the seller accepting responsibly for unpaid taxes prior to the sale.
There must be some paperwork, however informal?
I assume you dont legally have to have any when buying, Just pay the money, sign the stock transfer forms and off you go.There must be some paperwork, however informal?
It does not sound correct to me but this type of thing does happen.
Think of it like buying a car. Signing the v5 is all well and good but you’d still insist on a receipt, including the price, date of transaction, sold as seen, blah, blah.
Why you wouldn’t do this when buying a business is beyond me.
I’ve sold a business to mates by downloading a SPA from some random site and it took 5 mins. I’ve also sold a business when lawyers have spent weeks arguing every word on a 100 page SPA.
All relative I suppose......
Why you wouldn’t do this when buying a business is beyond me.
I’ve sold a business to mates by downloading a SPA from some random site and it took 5 mins. I’ve also sold a business when lawyers have spent weeks arguing every word on a 100 page SPA.
All relative I suppose......
PAULJ5555 said:
What I dont understand is if HMRC say they want £40,000 for example. What happens if the company closes down its a LTD company. I cant see HMRC losing out.
If the company doesn’t have the money to pay the tax, it’s insolvent and should be put into administration/liquidation. breadvan said:
Surely there must be a SPA (share purchase agreement)? This will/should include a warranty from the seller accepting responsibly for unpaid taxes prior to the sale.
There must be some paperwork, however informal?
It could be as Informal as I sell you the shares for £x. No reps, warranties or indemnities given. There must be some paperwork, however informal?
PAULJ5555 said:
What I dont understand is if HMRC say they want £40,000 for example. What happens if the company closes down its a LTD company. I cant see HMRC losing out.
Depends exactly what has gone on but HMRC could very well lose out. The company directors may then of course face criminal charges and or be banned from being company directors in the future.trickywoo said:
PAULJ5555 said:
What I dont understand is if HMRC say they want £40,000 for example. What happens if the company closes down its a LTD company. I cant see HMRC losing out.
Depends exactly what has gone on but HMRC could very well lose out. The company directors may then of course face criminal charges and or be banned from being company directors in the future.Gassing Station | Business | Top of Page | What's New | My Stuff