Director Loan - Debt Recovery?

[Menelaus]

Ok, slightly theoretical question here, based on advice given by accountant. Should the Ltd Co only be able to pay part of the CT, and the remainder not be repaid - what are the implications for me as Co Director?

My accountant has advised that should the Co fail to comply with an installment plan, HMRC will pursue the debt with the Co, and finally issue a winding up order.

Would this have any impact on my personal credit rating, or would it have an affect on starting a new Ltd Co or securing contracts through agencies etc?

To be clear, tax avoidance is the last thing I want, but paying back another Directors loan is also not on the cards for me. I am just slightly disbelieving that it appears to be that easy to take money from the company and basically get away with it?!

As a director, if this were any creditor other than HMRC I'd say you were pretty much bomb-proof. As it's HMRC that's a much different consideration.

For your personal credit rating to be impacted, HMRC would need to be obtain summary judgment against you as an individual, acting as a director. This is possible and indeed they've bankrupted people in the past.

I'd recommend trying hard to screw your fellow director (and not in a pleasurable, enjoyable-for-both-parties way). If you've got advice from an accountant or lawyer that you could wind up the co or allow the co to be wound up (e.g., not trading) then that might be the way forward.

If the Ltd Co has no assets on its balance sheet then you might find that you'd enjoy the benefit of winding up and starting afresh. If your fellow director has a shareholding he can be repaid with nothing given the existence of the debt.

[DS23]

good approach. shut down and start afresh.

[SallyAnne]

God Mary I can't believe you're going through this!!!


So the company gave him a loan which he hasn't paid back.

I'm guessing there was no credit agreement in place...so he didn't sign anything to agree to pay it back by a certain date or anything...

As far as his situation goes, the only thing he's liable for is a bigger personal tax bill.
Make sure HMRC know about this and chase him for extra tax from it.

Is he earning from anywhere else? Is he on the dole? Shaft him as much as you can with regards to shopping him up to people.
Infact, just shop him up to everyone - ring the police and say he's got child porn on his PC too - the fooker deserves it

<breathe>

With regards to your company...I doubt you'll legally be able to chase him for the money back, so your compay is screwed if you dont have the corp tax bill. Unless you can write this money off as "fraud", therefore seriously reducing your corp tax bill?
Your accountant should really be on the case with this stuff though - are you with SJD? I bet they'd be able to sort it.

You should walk away scot free as long as your accountant does his job right - just stay calm, focussed, and use your business head.

And set up a web page/facebook page with all the details of this moron so that everyone else can see what he's done to you.
Heck get Watchdog involved!!

I'd string him out me like, completely.

In fact, you're already in sh1t loads of debt - add another grand to that to get someone to knee-cap him.

You are NOT a victim!

[DaveB]

They have advised that if the loan is repaid within nine months of the end of accounting period (which is Dec), no tax is payable. However if the loan is not repaid within nine months of end of financial year, tax of 25% of the remainder of the loan must be paid, i.e a further 4.5k.

I just don't want to be liable for repaying his debt as part of unpaid CT. When HMRC offer a repayment plan, he will probably ignore it (as per) which will leave me to repay HIS debt, as he knows I have more at stake.

All very worrying but not unexpected given everything else he's done to date!

Thats for the CT and is right.

However, if he doesnt pay the money back on time he becomes personally liable for income tax on it ( probably at 40% ) as HMRC will then deem it to be a payment and not a loan.

So he could end up with a tax bill for £7200. The way he's going he may well "forget" to declare it on his SA for the year, hence my comment about talking to HMRC.

[pmeswani]

Ok, slightly theoretical question here, based on advice given by accountant. Should the Ltd Co only be able to pay part of the CT, and the remainder not be repaid - what are the implications for me as Co Director?

My accountant has advised that should the Co fail to comply with an installment plan, HMRC will pursue the debt with the Co, and finally issue a winding up order.

Would this have any impact on my personal credit rating, or would it have an affect on starting a new Ltd Co or securing contracts through agencies etc?

To be clear, tax avoidance is the last thing I want, but paying back another Directors loan is also not on the cards for me. I am just slightly disbelieving that it appears to be that easy to take money from the company and basically get away with it?!

Why not just transfer the whole business over to him and let him take on the problem with HMRC (i.e. resign as the director of the business)? I'm assuming he is still a director of the business?

[DaveB]

Why not just transfer the whole business over to him and let him take on the problem with HMRC (i.e. resign as the director of the business)? I'm assuming he is still a director of the business?

IIRC resigning as a director doesnt absolve you of liability for previous coporate actions, only of those that occur after you have resigned.

[Friendly Accountant]

Thats for the CT and is right.

However, if he doesnt pay the money back on time he becomes personally liable for income tax on it ( probably at 40% ) as HMRC will then deem it to be a payment and not a loan.

So he could end up with a tax bill for £7200. The way he's going he may well "forget" to declare it on his SA for the year, hence my comment about talking to HMRC.

Just to be clear. If the loan isn't repaid within 9 months of the year-end, it is the [U]company[U] that incurrs the 25% tax liability, not him. The only way he gets a tax liability associated with the loan is if it is forgiven. Well, also, his P11D from the company should show a benefit in kind associated with the loan if he hasn't paid interest on it.

Assuming you are no longer billing through the company, I think you should consider letting it go bust. BUT you should really talk to an insolvency practitioner before you consider this, to determine the likelihood of HMRC coming after you as director and the potential impact on your credit rating. I could guess at these, as could any accountant, but, if I were you, I'd talk to an insolvency specialist as they will have these answers and may be able to raise other issues. I would expect that a liquidator would go after his debt to the company first, before they get into trying to go after you in your role as director. I believe that, in order to go after you as a director, they would have to prove that you were letting the company trade even though you knew it couldn't pay its bills (Wrongful trading). That is a legal issue and may not be easy for them to establish.

Talk to an insolvency practitioner - outline the situation and get their opinion.

If you don't want to do that, by all means, get a debt collector involved, file a claim, obtain a judgement against him and do everything possible to collect the debt, assuming that his finances are such that you will be able to get something out of him.

[DS23]

i wonder if the PCG could assist in some way?

[SallyAnne]

I can't believe my suggestion of getting him knee-capped has been passed by...

In the words of Scrappy Doo "let me at 'im!"

[DaveB]

I can't believe my suggestion of getting him knee-capped has been passed by...

In the words of Scrappy Doo "let me at 'im!"

The offer of a few select members of the forum "having a quiet word" was floated in a previous thread and graciously declined.