Director's liability for non-filing of VAT returns?
Discussion
Not had to deal with this before, just need a quick answer if possible from someone who knows. It just had to come up on a Friday evening!
Friend agreed to be a director of a company started by her bankrupt father a few years ago. She had nothing to do with the running of the business other than signing cheques. Not a client of mine, I wouldn't let something like this happen. She trusted her dad.
Two weeks ago she got a call from HMRC demanding payment for four years worth of VAT assessments. She has tried to get her father to hand over the records, which he has not yet done. She is panicking.
Could she be held personally liable for the company's VAT indiscretions?
Obviously I recognize that she has no excuse for not knowing what is going on, and am trying to get hold of the records to resolve it for her. I do understand the VAT penalty regime, but the company would be liable for any late payment penalties and interest.
Friend agreed to be a director of a company started by her bankrupt father a few years ago. She had nothing to do with the running of the business other than signing cheques. Not a client of mine, I wouldn't let something like this happen. She trusted her dad.
Two weeks ago she got a call from HMRC demanding payment for four years worth of VAT assessments. She has tried to get her father to hand over the records, which he has not yet done. She is panicking.
Could she be held personally liable for the company's VAT indiscretions?
Obviously I recognize that she has no excuse for not knowing what is going on, and am trying to get hold of the records to resolve it for her. I do understand the VAT penalty regime, but the company would be liable for any late payment penalties and interest.
If the company doesn't have sufficient assets and it can be proved that she was negligent there is every chance she could be held responsible and liable for any outstanding balance owed. Hopefully there's enough in the company to cover all amounts owed.
I know it's too late but being a company director is actually a big responsibility and should be taken very seriously indeed. I would never assume the role to just sign cheques.
I know it's too late but being a company director is actually a big responsibility and should be taken very seriously indeed. I would never assume the role to just sign cheques.
Hopefully the company can pay any VAT due and it doesn't go any further so she can resign and get away from the situation. Very difficult being a family member as well.
Unfortunately HMRC have some serious incentives to collect all taxes owed at the moment and have a large budget to do so. Hopefully this is small enough not to feature too highly on their radar.
Unfortunately HMRC have some serious incentives to collect all taxes owed at the moment and have a large budget to do so. Hopefully this is small enough not to feature too highly on their radar.
Sadly, it's the directors' responsibility to ensure that the company fulfills its legal obligations - which includes paying its VAT liabilities and filing the VAT returns on time.
She was very foolish to agree to be a director without finding out what her duties were.
As the previous poster has said, she needs to find out if there are other directors involved.
She was very foolish to agree to be a director without finding out what her duties were.
As the previous poster has said, she needs to find out if there are other directors involved.
Eric Mc said:
Sadly, it's the directors' responsibility to ensure that the company fulfills its legal obligations - which includes paying its VAT liabilities and filing the VAT returns on time.
She was very foolish to agree to be a director without finding out what her duties were.
As the previous poster has said, she needs to find out if there are other directors involved.
She's in her 20s and trusted her own father. I will do a company search and find out, but suspect she's on her own there. She probably has the bank statements. Should give me a clue as to the scale.She was very foolish to agree to be a director without finding out what her duties were.
As the previous poster has said, she needs to find out if there are other directors involved.
Thanks for the prompt response guys
It sounds like
- the company was set up some time ago
- no vat returns have been filed
- HMRC has raised assessments for the last four years
- the dad has been bankrupt for a chunk of the life of the company
- the dad has been running the company
- the daughter is a front for the dad
- the daughter has known that her dad has been bankrupt and running the company.
If so, it's potentially pretty bleak for the daughter. S 15 of the Company Directors Disqaulification Act provides that someone who acts in the management of a company, and who acts on the instructions on someone they know to be an undischarged bankrupt is liable for the debts of the company incurred during that period of acting. There's no need to prove negligence on her part.
Assuming these are in fact HMRC assessments, they may be open to challenge and reduction. But whatever the true liability to HMRC, she's on the hook for it.
I doubt there's more than a few pennies in the company, unfortunately. That's the way these things tend to work.
- the company was set up some time ago
- no vat returns have been filed
- HMRC has raised assessments for the last four years
- the dad has been bankrupt for a chunk of the life of the company
- the dad has been running the company
- the daughter is a front for the dad
- the daughter has known that her dad has been bankrupt and running the company.
If so, it's potentially pretty bleak for the daughter. S 15 of the Company Directors Disqaulification Act provides that someone who acts in the management of a company, and who acts on the instructions on someone they know to be an undischarged bankrupt is liable for the debts of the company incurred during that period of acting. There's no need to prove negligence on her part.
Assuming these are in fact HMRC assessments, they may be open to challenge and reduction. But whatever the true liability to HMRC, she's on the hook for it.
I doubt there's more than a few pennies in the company, unfortunately. That's the way these things tend to work.
Thanks for all your posts guys. All very informative, Greg's particularly so. Your surmises, everyone, are about how i see the situation. I can only act as requested, my main hope is that there may be a reduction to be obtained by filing the missing returns. I am aware of the four year time limit on HMRC assessments, but even this could be extended.
I will call her again and get the company name and obtain accounts, as these at least must have been filed. Then take it from there. I will update the thread when I know more as a thank you for your help and interest.
I will call her again and get the company name and obtain accounts, as these at least must have been filed. Then take it from there. I will update the thread when I know more as a thank you for your help and interest.
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