Close LTD company with taxes due

[NBHolt]

Hi All,

I've found the current contract market is poor in my field of expertise and in my geographic location.
As such, I've been looking at permanent positions and i've been offered a position.

My company however owes ~£6k corporation tax and ~£3k VAT but has not got enough funds in the bank to pay.

Being on a significantly lower salary, I cannot afford to personally pay this and I don't have any savings to put towards it.

What are my options?

[northernladuk]

Did you have an accountant when you were trading you could turn to?

Are you sure you aren't in even bigger doo doo than the post initially suggests? If you owe the company money that would indicate you've taken too much out and if you've done that via dividends they are going to be illegal as they were not from profit. This could bump up your exposure somewhat surely?

Here are some articles that discuss your situation.

http://www.contractoruk.com/limited_...ation_tax.html

None of them have an easy answer for you I am afraid.

[ASB]

Hi All,

I've found the current contract market is poor in my field of expertise and in my geographic location.
As such, I've been looking at permanent positions and i've been offered a position.

My company however owes ~£6k corporation tax and ~£3k VAT but has not got enough funds in the bank to pay.

Being on a significantly lower salary, I cannot afford to personally pay this and I don't have any savings to put towards it.

What are my options?

So basically you have simply spent the money that should have been used for the CT and also the VAT ?

What on ?

If you have been paying dividends it is possible you will have to repay these. They could well have not been supported by retained profits.

If you have simply been trying to keep going and have now thrown in the towel then there is the question of whether you have been trading whilst insolvent.

There is certainly some chance that HMRC may wish to hold you personally liable, and they may be able to make it stick.

A chat with the accountant might be a good place to start, or an insolvency practitioner. They may offer a free initial consultation.

You can look quite easily the steps involved in a do it your self liquidation. HMRC will probably object though. This will at least start the dialogue with them.

[LondonManc]

I'd say that your best bet is to take a personal loan on, get HMRC paid off and go from there. Better having unsecured debt that you can service as and when than having to fend of HMRC debt collection. If you're already late, ring HMRC, advising of a cash flow issue and when you expect to pay. I cocked up back in 2010 when switching from umbrella to limited on a different issue, rang HMRC and explained the situation. The advisor said then that it's always better to ring up than sit there and worry, whatever it may be.

[Lance]

Being on a significantly lower salary, I cannot afford to personally pay this and I don't have any savings to put towards it.
What are my options?

You don't really have any. You have to pay it.
You've taken the money leaving the company insolvent (that's against the law). So it's probably fraud.

Have you paid personal tax on the money you've taken out?

Your VAT bill is quite low compared to CT so you've paid some VAT returns already? This suggests that you are one VAT payment outstanding. If so then you've got well over a year to pay the CT so maybe not all that bad. Missing details though.

So ring HMRC ASAP. You may simply owe the VAT right now.
You may be able to pay dividends back into the company (when you can afford) to cover CT liability.
You really ought to talk to an accountant, but if you don't have one on a monthly retainer that's gonna cost another £1000 to £2000 probably.

The suggestion to take out a loan to pay back is probably where you need to go, but first off you must fully understand the total liability, including fines and any personal tax owed, and when they need to be paid as you may have 18 months of flexibility (sell your body down Hull docks???)


Good luck.

[NBHolt]

Thanks for the responses.
This was caused by initial poor advice when i started out contracting and then becoming unwell for 2-3 months and still drawing out money to pay bills etc.

Ultimately i'm the only one to blame and i'll be first to admit, but unfortunately this has left me in this position.

Yes i've paid 4/6 VAT returns on time, leaving me with £3,500 outstanding (now £2,500 due to a payment plan being put in place) and i've currently accrued £1,100 for the current quarter.

I've spoken to HMRC but unfortunately I didn't have my UTR numbers so I could only get generic info.
I asked if i could repay over 2-3 years and they said that may be possible and as the company will seize trading no new debt can be added which was a good point.

My accountant is going to get back to me in the morning with a possible solution, no accounts have been filed yet so the figure may come down or up slightly (the figures that I have given have come from freeagent - prior to including office expenses etc)

My personal credit isn't good enough for a personal loan at the moment, i'm hoping i can do a long payment plan with HMRC

I'll keep all up to date with how I get on.

[GB9]

Thanks for the responses.
This was caused by initial poor advice when i started out contracting and then becoming unwell for 2-3 months and still drawing out money to pay bills etc.

Ultimately i'm the only one to blame and i'll be first to admit, but unfortunately this has left me in this position.

Yes i've paid 4/6 VAT returns on time, leaving me with £3,500 outstanding (now £2,500 due to a payment plan being put in place) and i've currently accrued £1,100 for the current quarter.

I've spoken to HMRC but unfortunately I didn't have my UTR numbers so I could only get generic info.
I asked if i could repay over 2-3 years and they said that may be possible and as the company will seize trading no new debt can be added which was a good point.

My accountant is going to get back to me in the morning with a possible solution, no accounts have been filed yet so the figure may come down or up slightly (the figures that I have given have come from freeagent - prior to including office expenses etc)

My personal credit isn't good enough for a personal loan at the moment, i'm hoping i can do a long payment plan with HMRC

I'll keep all up to date with how I get on.

Good on you for facing up to your responsibilities. Plenty of people wouldn't. And you definitely don't want to be on the wrong side of HMRC.

I hope it works out OK for you.

[Hobosapien]

...I'll keep all up to date with how I get on.

Hope things turn out ok for attempting to sort it out.

For anyone else not yet in a similar position the old rule that paying the 'VAT man' is top priority and not to be messed with probably still stands.

The 'tax man' (even though they're all under the guise of HMRC these days) is a bit more lenient in that you have a lot more time to pay the corp tax (9 months after company year end) before he's awaken and wants his money.

Personally for sake of peace of mind I'd either earn or borrow the money to pay off HMRC asap. I once did similar to this by living off a credit card to pay my obligations during a very lean period in my early years as a contractor where I took a break from it, before I got more clued up about how it all works re running a ltd. Not ideal as the stress of paying off the credit card was still there until I got back in the contracting game and paid it all off.

[LondonManc]

Hope things turn out ok for attempting to sort it out.

For anyone else not yet in a similar position the old rule that paying the 'VAT man' is top priority and not to be messed with probably still stands.

The 'tax man' (even though they're all under the guise of HMRC these days) is a bit more lenient in that you have a lot more time to pay the corp tax (9 months after company year end) before he's awaken and wants his money.

Personally for sake of peace of mind I'd either earn or borrow the money to pay off HMRC asap. I once did similar to this by living off a credit card to pay my obligations during a very lean period in my early years as a contractor where I took a break from it, before I got more clued up about how it all works re running a ltd. Not ideal as the stress of paying off the credit card was still there until I got back in the contracting game and paid it all off.

Indeed. If you can maintain the minimum payment, it's a possibility; then when you get back on your feet, you can look for a card that does 0% on balance transfers and clear off what is, in effect, pure capital over 3-6 months.

[northernladuk]

Sorted?