Ending business

[Stevenj214]

A company is no longer needed (the company was formed for contracting), has debts of £3200 owed to HMRC for corporation tax and £300 outstanding for N.I contributions and £300 in the company bank account.

£4000 is outstanding in Director's Loans. Of this, £3000 has been subject to some sort of tax (at 25% I believe?) but £1000 has not been subject to this tax yet.

The business is looking to be struck off/dissolved using this http://www.companieshouse.gov.uk/about/pdf/gbw2s.p...

So questions:

1) Will HMRC oppose this dissolution?

2) If yes, will the company need to go into liquidation?

3) If yes, how will the Director's Loans be treated? Will there be any liability to the Directors?

Edited by Stevenj214 on Tuesday 14th April 19:34

[UpTheIron]

Stevenj214 said:

A company is no longer needed (the company was formed for contracting), has debts of £3200 owed to HMRC for corporation tax and £300 outstanding for N.I contributions and £300 in the company bank account.

£4000 is outstanding in Director's Loans. Of this, £3000 has been subject to some sort of tax (at 25% I believe?) but £1000 has not been subject to this tax yet.

The business is looking to be struck off/dissolved using this http://www.companieshouse.gov.uk/about/pdf/gbw2s.p...

So questions:

1) Will HMRC oppose this dissolution?

2) If yes, will the company need to go into liquidation?

3) If yes, how will the Director's Loans be treated? Will there be any liability to the Directors?

Edited by Stevenj214 on Tuesday 14th April 19:34

You need to speak to an accountant.

Was there a genuine trading loss, or did you take too many dividends when not having sufficient profits to do this?
The S419 charge on the loan can be reclaimed but not until 9 months after the accounting period during which the loan is repaid. My guess is that you can't just write off the loan and are liable personally.

Do you personally have the funds to repay the loan and pay the outstanding tax?

How did you get into this situation - did you have professional advice, or might there be other debts / fines / penalties that you are not aware of?

[Stevenj214]

UpTheIron said:

You need to speak to an accountant.

Was there a genuine trading loss, or did you take too many dividends when not having sufficient profits to do this?
The S419 charge on the loan can be reclaimed but not until 9 months after the accounting period during which the loan is repaid. My guess is that you can't just write off the loan and are liable personally.

Do you personally have the funds to repay the loan and pay the outstanding tax?

How did you get into this situation - did you have professional advice, or might there be other debts / fines / penalties that you are not aware of?

It's not my company. The company accountant is on the case and is looking at the dissolution first of all (although I don't know if that's under his own volition or by direction of the Directors).

The company was a shell company (I think it's called?) for a contractor. The problems have arisen from not putting aside enough from contracts for tax/n.i and the directors loans were taken out during times when no work was available.

The director now has a permanant position in a company, but has a hefty mortgage and personal debt and so would struggle severely to pay off the Directors loan (infact, would most likely have to borrow the money to do so).

Edited by Stevenj214 on Tuesday 14th April 19:59

[jamesuk28]

Stevenj214 said:

1) Will HMRC oppose this dissolution?

Edited by Stevenj214 on Tuesday 14th April 19:34

yep, along with any creditors and they will get it, 6 month initial delay.

Directors may be personally liable if fradulant or wrongful trading is proved, but don't panic thats very very hard to prove.

ETA you could liqidate the company but it will probably be cheaper to pay the company's liabailties

Edited by jamesuk28 on Tuesday 14th April 20:29

[Stevenj214]

jamesuk28 said:

Stevenj214 said:

1) Will HMRC oppose this dissolution?

Edited by Stevenj214 on Tuesday 14th April 19:34

yep, along with any creditors and they will get it, 6 month initial delay.

Directors may be personally liable if fradulant or wrongful trading is proved, but don't panic thats very very hard to prove.

ETA you could liqidate the company but it will probably be cheaper to pay the company's liabailties

Edited by jamesuk28 on Tuesday 14th April 20:29

So assuming HMRC oppose the dissolusion, the next step would be compulsory liquidation (i believe voluntary liquidation is only possible if the company is solvent?) - with liquidation, I believe it's the decision of the liquidator whether to pursue the Director's Loans in full, in part or not at all. Other than that, the assets (£300 cash) will be distributed amongst creditors.

So the options would be:

1) Dissolve company, hope HMRC don't challenge (unlikely)

2) Repay the Directors loan, pay HMRC, reclaim the tax paid on £3000 of the Directors loans and voluntarily wind up the company. Total cost = £4000, cash left to remove from business £800 ish.

3) Compulsory liquidation, assets distributed, Directors loans reclaimed in whole/part/not at all as per liquidator. Total potential liability = £4000

Is this correct? Have I missed any major costs? Is there anyway for the company to be wound up with minimum cost to the Directors?

Edited by Stevenj214 on Tuesday 14th April 20:57

[Stevenj214]

Bump to page 1 for any more input.

[jamesuk28]

Seriously I would not panic, this happens day in day out. Its only keen debt collectors like me that oppose striking off on behalf of a client. HMRC probably won't even notice until its too late.

Propose to strike off, hold your breath and keep your fingers crossed, you will probably get away with it, unless of course one of your creditors is my client, in which case your screwed.

[Stevenj214]

jamesuk28 said:

Seriously I would not panic, this happens day in day out. Its only keen debt collectors like me that oppose striking off on behalf of a client. HMRC probably won't even notice until its too late.

Propose to strike off, hold your breath and keep your fingers crossed, you will probably get away with it, unless of course one of your creditors is my client, in which case your screwed.

Lol. As I mentioned previously it's not my company but it may indirectly affect me. The only creditor is HMRC so yeh, fingers crossed the striking off goes through unnoticed.

[ianash]

Even after you've had the company struck off, HMRC can apply to have the company reinstated.

[Stevenj214]

ianash said:

Even after you've had the company struck off, HMRC can apply to have the company reinstated.

I think that's the crux of it, at least initially. Does anyone know how often HMRC pursue cases like this?

[ianash]

Stevenj214 said:

ianash said:

Even after you've had the company struck off, HMRC can apply to have the company reinstated.

I think that's the crux of it, at least initially. Does anyone know how often HMRC pursue cases like this?

I guess it depends upon how much they are owed and whether or not they think you're taking the piss. I doubt figures are published for this sort of thing, as it would be done at district level by HMRC and Companies House have no reason to supply figures like these.. You could try writing Comp Hse under the freedom of Info Act.

[jamesuk28]

ianash said:

Even after you've had the company struck off, HMRC can apply to have the company reinstated.

That is expensive to do, and usually fails especially if the assets have been liquidated. Any creditor can have a struck off company reinstated if they can show due reason, but it is very rarely worth it.

[ianash]

jamesuk28 said:

ianash said:

Even after you've had the company struck off, HMRC can apply to have the company reinstated.

That is expensive to do, and usually fails especially if the assets have been liquidated. Any creditor can have a struck off company reinstated if they can show due reason, but it is very rarely worth it.

I wouldn't take issue on that with you James. Last year I got a company struck off for a friend based in the US. I got a phone call from HMRC who were not best pleased about it. However, as the only Director was US based I explained to them if they blocked the striking off they wouldn't achieve anything, certainly not any payment. The amount owed to HMRC was about £4K most of which was penalties and fines and these were disputed by the US Director. They allowed the striking off and I never heard another word from them. I don't think they would have been so passive if the Director had been UK based.