Investigaton

[psychocandy]

Yes indeed. I've had a few over the years too. Usual scenario is that they don't engage an accountant at first and take out all the money from day 1, making no provision for VAT nor CT, and either underestimating the taxes or relying on future earnings to pay the tax. Then, usually engage the accountant some 2 years or more after starting when they start getting penalty notices and reminders from HMRC and Co House for late filings/payments. If late with VAT, PAYE or Accounts, there'll be the penalties to pay which also eat in to the profits and cash flow.

The downward spiral is made even worse because of either the h/r tax on the amount drawn as dividends and the 25% income tax on the overdrawn DLA, so more drawings are needed to pay the H/r tax, the CT/VAT money is spent on the 25% DLA tax, and so it goes on. Then of course, some misinformed people will have been paying themselves a large "wage" under PAYE, so causing unnecessary employers and employees NIC, which hasn't been paid either.

It can take years to rectify as you have to chip away at it to bring it all right again. You need profits to vote a dividend to start paying off the DLA, but client also needs dividends to live, so quite a slow process. Then several years of balancing repayments of the DLA, then the 9 month delay to get the 25% DLA tax refunded, etc.

Of course, we don't know the situation with the OP. We don't know if he even had an accountant at first, or the nature of the engagement with the accountant. It's a bit unfair to blame the accountant without knowing the full story. If the accountant was engaged late or only engaged for the year end accounts prep, then they'll have been on the back foot throughout. Yes, I appreciate some accountants are poor, and it could be that the OP engaged an accountant from day 1 on a full service agreement to overview everything and has indeed been negligent, but until the OP confirms, it's all speculation.

As others have said, there will be an answer to this issue. First thing is to get some proper figures as to what's owed for each tax. Second thing is for the OP to come clean with his wife. That's the hardest part. Then they need to work together and with HMRC to negotiate a solution. Yes, that may be bankruptcy and losing their house, but it may also be a matter of negotiation and paying off the debts over time. What is clear is that the OP has been over-spending. As well as working every hour to earn more, they also need to drastically cut their spending and if that means selling their home and downsizing, then it needs to be done.

Thanks for the explanation and I can see how it all adds up.

BUT IMHO there is no excuse for ignorance and stupidity. Sometimes I'm not sure its even that with a lot of people - more like greed. They see all the money coming in, stick their head in the sand, and think wow what can I spent it all on I'll worry about it later. Then whine about it years down the line when it all comes home to roost.

Very little sympathy from me for most cases like this.

[jimbeam9]

Thanks everyone, I am blown away with the amount of responses here.

I've had an accountant from day 1 who deals with all of the company accounts and our PAYE, but does not do my personal returns. He did offer, but I said I was happy to do these myself. That was around the time of the first one I did in 2010. There was genuinely no extra tax to pay for either of us that year.

I spent far too much money that first couple of years. Since then, I've essentially robbed my own company and without declaring dividends properly. My accountant kept warning me that I'd taken illegal dividends and I've been assuring him that I'd get on top of it.

It wasn't until the letters came and I was forced to look at how much I'd taken from the company account that I realised it'd be in the order of 40k each to pay and that's before any penalties.

I have been stupid and for a while now I've been far more sensible, though paying off so much this year has been really tough going. I'd like to pay every penny owed - I just hope they allow me to.

[psychocandy]

Thanks everyone, I am blown away with the amount of responses here.

I've had an accountant from day 1 who deals with all of the company accounts and our PAYE, but does not do my personal returns. He did offer, but I said I was happy to do these myself. That was around the time of the first one I did in 2010. There was genuinely no extra tax to pay for either of us that year.

I spent far too much money that first couple of years. Since then, I've essentially robbed my own company and without declaring dividends properly. My accountant kept warning me that I'd taken illegal dividends and I've been assuring him that I'd get on top of it.

It wasn't until the letters came and I was forced to look at how much I'd taken from the company account that I realised it'd be in the order of 40k each to pay and that's before any penalties.

I have been stupid and for a while now I've been far more sensible, though paying off so much this year has been really tough going. I'd like to pay every penny owed - I just hope they allow me to.

Hmmm. So you've worked its not clever doing what you did. At least you've admitted it and are trying to put it right.

Thats the thing with accountants they can advise you but end of the day its your company. Lead a horse to water and all that....