Bankruptcy and Contracting

[sprinter]

I wish to go contracting as a ltd company, and have the opportunity of a job fairly soon. The only problem is that I was recently declared bankrupt ( long story ). The official reciever stated that, as the bankruptcy was not my fault, I would be discharged in 6 months.

I tried to defend the bankruptcy, and one of my reasons was that it would restrict my ability to work as a contractor as a ltd company. All to no avail however. The official reciever did however let it slip that my wife can register the ltd company and I would be an employee. She would invoice the customer and then pay me. I would take no part in the running of the company.

Does anyone know if this is correct and if so, how do you determine what to pay me as an employee, bearing in mind that if there is any money left over, the OR will take 70% of the excess. My wife could obviously be paid dividends, but do i have to be paid a realistic wage, or as someone has suggested to me, I should be paid the bare minimum to avoid ( not evade ) paying too much NI etc; If I was not paid a realistic wage for the job I was doing, is that classed as some sort of misdemeaner.

Any input would be appreciated.

[Jubber]

Why not leave it until you're discharged.? If it was a straightforward case you can be a director as soon as you are discharged.

Another problem is that all your tax affairs will be dealt with by the receiver until you are discharged (as I understand it) so that may cause a problem. Can you not go PAYE on this one.? If you went bust this month (in this tax year) you will not pay any tax for the remainder of this tax year.

The receiver will snaffle most of the cash anyway, so why not sign on and do the garden for a few months. After discharge (if it was a straight forward case) you'll pay nothing more to him and that will be the end of it.

Have you an accountant to ask.?

[sidknows]

theres nothing stopping you from using an umbrella co until you are discharged and your take home pay will not suffer that much
The money could be paid into your wife's account

[malvolio]

theres nothing stopping you from using an umbrella co until you are discharged and your take home pay will not suffer that much
The money could be paid into your wife's account

Agreed. You can't be a director while bankrupt and trying to rig up a LtdCo without being one is likely to be tricky (not least trying to set up a bank account). Better to take the umbrella route to get established and switch over when you are more in control of your own destiny.

Who was it said that most successful businessmen have been bankrupt at least once?

[BrilloPad]

Who was it said that most successful businessmen have been bankrupt at least once?

I think it was a bankrupt businessman.

[NotAllThere]

I don't see how this differs from the normal one-man-band ltdco model. The only difference is the wife is the director. He can get a small salary and perhaps dividends - the rest going to his wife.

The money that goes to the OR - is that just his fees, or does it go towards settlement of the original debts? ( I'm just thinking that while the bankruptcy might not be his fault, it's also the case that it isn't his creditors fault either, so avoiding paying the OR might have a moral cast to it ).

[basshead]

Who was it said that most successful businessmen have been bankrupt at least once?

Angus Loughran?

[BA to the Stars]

Does anyone know if this is correct and if so, how do you determine what to pay me as an employee, bearing in mind that if there is any money left over, the OR will take 70% of the excess.

If money is paid to a limited company of which you are an employee, the OR cannot touch the funds within the limited company, it is a seperate legal entity. It is you personally who is bankrupt, the OR may be able to go after your income (including dividends).

Best bet is to speak to an accountant and possibly also a solicitor specialising in bankruptcy / insolvency

[lambrini_socialist]

Who was it said that most successful businessmen have been bankrupt at least once?

it was a mate of mine, he was talking about Richard Branson who i think went bust a few times. my mate's online retail business went badly t!ts up due to "market conditions" or "bad luck" or something - nothing to do with the fact that every time he was out on the town, completely spannered and with no money left in his current account, he'd whip out his business Visa and use it to buy rounds of shots, vindaloos, taxi cabs etc.

[Jubber]

.... nothing to do with the fact that every time he was out on the town, completely spannered and with no money left in his current account, he'd whip out his business Visa and use it to buy rounds of shots, vindaloos, taxi cabs etc.

Yes, alcoholism can often lead to bankruptcy

J