Closing my Ltd Company and Paying Tax Liabilities from Personal Bank Account

[Tractor Trace]

I have started the process of closing my limited company via my accountants but am very suspicious about the steps in the process that they have outlined in them doing so.

They have stated that I should not close my business bank account at this time as any tax refunds due to the company will be need to be refunded to that account. However they then go on to say that should there be any final tax liabilities, these will be paid from my personal bank account and to provide them with proof of payment following distribution of funds. Surely this is incorrect? As an individual/ director am I not a separate entity from the company and therefore tax liabilities should come from the business?

[Lance]

when you take the final distribution there may be personal tax to pay. Either CGT or divi tax.

You could ask them why. Or if you trust them so little you could sack them and get another accountant.

[jamesbrown]

They are probably talking about any personal taxes that accrue from the (capital or dividend) distributions you receive, not the business taxes that must be paid before the company is closed. But, I don't know, I suppose you could...... ask them?

[Maslins]

It could be what the posters above have stated (eg that it's personal tax liabilities for you to pay later). Alternatively it might be that if your affairs have been a bit messy, some things late etc, your accountant doesn't know with 100% certainty what your company owes to/is owed by HMRC for each business tax. Therefore they're suggesting:
1) they believe you're due a refund for at least one business tax, and HMRC will want to pay that into a company bank account (not your personal bank account), hence why you need to keep the business bank account open until that's in.
2) they're unsure re other taxes, think they might be £nil, so are happy enough with you withdrawing remaining funds and closing the company bank account after the above refund comes in.
3) they're then just warning you that if it transpires there is a company liability on some other tax, you can't just ignore it as the company bank account is now closed, you'd need to settle it from the funds you'd just withdrawn.
(I'm guessing you're just striking your company off here from the way you've phrased things, but in an MVL it would be broadly the same...the liquidator's told HMRC affairs are clear, they distribute funds to you in good faith based on that, if it transpires there are company HMRC liabilities, you're responsible for paying those).

[Tractor Trace]

They've basically replied again to say once the closure fee has been paid that I will transfer all of the remaining business funds to a non-interest bearing personal account. These funds will sit to one side as they are still company funds until the final accounts have been prepared and then thay can advise on any distribution. This is so that they can prepare the final closure accounts with no assets in the company, so any liability payments are to be made from the business funds sat in my personal account.

Surely by having a personal account in my name it would mean I as the individual would be paying tax that should be paid by the company? That's like withdrawing a load of money from a company account as though it was all mine to do with it as I please! Am I getting something wrong here?

[jamesbrown]

No, I don't think you're getting anything wrong. Company funds should not be sitting in your personal account and you don't want to mess with trust agreements. If this is a simple strike off, I don't understand why they cannot prepare the final accounts, get you to pay all outstanding liabilities and then you can transfer the net assets (<£25k) into your personal account at that point (and then deal with CGT in your personal tax return).

[Tractor Trace]

Why do you think they are asking me to do it this way? Is this actually illegal?

[Lance]

Why do you think they are asking me to do it this way? Is this actually illegal?

talk to another professional if you're not sure.
It's unlikely to be illegal as most things aren't. But it doesn't mean it's right.

For what it's worth, I wouldn't use my accountant to close my company. I'd use a liquidator or strike it off myself.

[Maslins]

I can't think of a reason off the top of my head why they want you to withdraw funds now rather than a bit later...but tbh I don't think it's anything to be concerned about. If you're taking cash out now that you/your accountant don't deem you're yet "earned", then it's temporarily a loan, from your company, to you. If it then transpires your company has some tax liabilities to settle, you pay those from the loan you took. This clears the company debt, and reduces the loan to you. I'm guessing then when the accountant is happy all is complete, whatever's left of that loan then becomes the amount deemed to be the distribution of final company assets, the loan is cleared, and that figure is what you potentially suffer personal tax on.

[jamesbrown]

Why do you think they are asking me to do it this way? Is this actually illegal?

It isn't illegal for them to ask you and it isn't illegal for you to do it, but it does create problems for you and it's completely unnecessary. There is no need to create a situation where you need a trust agreement or need to account for a director's loan above £10k. They don't need a zero net asset position to generate the final accounts. As to why they are asking you, they are probably incompetent, lazy or something is being lost in translation.