Director Loan - Debt Recovery?

[Zippy]

MP - glad you got some response but don't give too much info on here. Cover yourself.

[MaryPoppins]

MP - glad you got some response but don't give too much info on here. Cover yourself.

Yeah, I know - ta x

[TykeMerc]

I can't offer better suggestions than those you've already had through this thread, but you're entirely right to pursue the matter in as rational and unemotional a manner as you can. With possible bankruptcy on the cards you've got to chase as far as you possibly can.

You're right to pursue him through the CSA as irrespective of what his mother thinks he's got a responsibility.

[MaryPoppins]

I can't offer better suggestions than those you've already had through this thread, but you're entirely right to pursue the matter in as rational and unemotional a manner as you can. With possible bankruptcy on the cards you've got to chase as far as you possibly can.

You're right to pursue him through the CSA as irrespective of what his mother thinks he's got a responsibility.

I reckon so - getting emotional won't get me anywhere, and I am not someone who will hide from something hoping it will disappear. As for the CSA, it does slightly sit oddly with me having to do it, too proud maybe, but it is the right thing.

[MaryPoppins]

Thought I would ask for some advice, in the hope that maybe someone has experienced something similar. I have seen an insolvency practitioner on this matter (unable to pay CT, funds have gone, along with the other director - in summation), but all they were after was 5k to do what HMRC may apparantly do in the end anyway.

Having spoken to HMRC, I have been told that the following actions, in the following sequence, will be taken, should no action be made to repay (or arrange to repay) the CT:

distraint (visiting Ltd Co address, i.e. my home, making a list of belongings, then taking said belongings )

- magistrates court proceedings

- county court proceedings

- bankruptcy proceedings

- winding up company

Not sure how these affect me as a Ltd Co director - surely my personal possessions aren't up for grabs? They seemed to think so.

My accountant 'advised' in a rather blase manner, that HMRC will simply wind the company up eventually, with some nasty letters and bailiff visits inbetween. I assumed I would have to prove the company has no assets, and that the debt is then basically unresolvable. I am starting to feel sick at the idea that this might not be the case.

They may be able to trace the other director, but I'm not sure they will bother, given that the tax office and Companies House hold my address as the registered address.

Ho hum. Very little I can do other than batten down the hatches I suppose.

[ASB]

Thought I would ask for some advice, in the hope that maybe someone has experienced something similar. I have seen an insolvency practitioner on this matter (unable to pay CT, funds have gone, along with the other director - in summation), but all they were after was 5k to do what HMRC may apparantly do in the end anyway.

Having spoken to HMRC, I have been told that the following actions, in the following sequence, will be taken, should no action be made to repay (or arrange to repay) the CT:

distraint (visiting Ltd Co address, i.e. my home, making a list of belongings, then taking said belongings )

- magistrates court proceedings

- county court proceedings

- bankruptcy proceedings

- winding up company

Not sure how these affect me as a Ltd Co director - surely my personal possessions aren't up for grabs? They seemed to think so.

My accountant 'advised' in a rather blase manner, that HMRC will simply wind the company up eventually, with some nasty letters and bailiff visits inbetween. I assumed I would have to prove the company has no assets, and that the debt is then basically unresolvable. I am starting to feel sick at the idea that this might not be the case.

They may be able to trace the other director, but I'm not sure they will bother, given that the tax office and Companies House hold my address as the registered address.

Ho hum. Very little I can do other than batten down the hatches I suppose.

MP,

I know you can do without all this.

Assumptions for ease: There was an 18k CT debt and your co director has run off with it. There is now a 18k debt + 4.5k for the tax - reclaimable when the loan is repaid.

- If the loan is forgiven then the 4.5 falls on the co-director. Forgiving the loan might be beneficial (though you'll obviously nbever see the 18k again)

- HMRC no longer have preferential creditor status. Though this doesn't make much difference

- HMRC cannot attack you personally unless they can show on the balance of probabilities (in county court) or beyond reasonable doubt (in criminal court) that you were in some way complicit.

- HMRC cannot use the transfer of obligations provisions to move the debt to you unless it can be shown that you were negligent (if he was able to write cheques and you started chasing as soon as he did then I think this would be at least a difficult hurdle).

- HMRC can do everything they described. But with one important detail that may not have been entirely clear. They cannot take away YOUR belongings. They can take away the company's though.

- Given your co director was your partner this perhaps clouds the above somewhat.

- Should anybody turn up with any sort of warrant under distraint proceedings DO NOT LET THEM IN UNDER ANY CIRCUMSTANCES. Talk on the doorstep, whatever, but if you let them in you have granted access and that is not a good place to be.

- There is a significant question as to whether your co director has acted beyond their powers by taking the money. There may potentially be a criminal offence involved. However, even if there is, it does not remove the company's responsibility to settle it's dues.

- An IP is probably pointless. They are likely to simply charge you lots to do what you can yourself.

- A CVA (corporate equivalent of an IVA) might be a possibility. If it becomes clear to HMRC that they are not going to be able to transfer the debt to you then they might just go for it. Something would be better than nothing.

- If you, as a director of the company, which is forced into insolvency find yourself with a difficult credit file (and you will) then that's the way it is.

- If you believe you can get through it without (corporate) insolvency then try and agree instalments with HMRC. Do not be over optimistic with how much you can afford to pay. HMRC get VERY cross should you need to renegotiate an agreed settlement.

All of this assumes of course that you are trading as a standard limited company. If you are an unlimited company (unlikely in the extreme) then the debt is yours (or more accurately the members) anyway.

If any of this is helpful, then I'm pleased.

[Zippy]

Good post ASB.

I'm sorry to hear that this is still a worry for you MP. Please don't despair though.

I'm pretty sure ASB is right, and they can't take your belongings (as the debt is owed by your company). If you have receipts for things you have bought then collect them together and put them somewhere safe.
Try and arrange a payment plan with HMRC - it would be in their interests as well as yours and would demonstrate an intent to pay. Try to do this in writing. This will help if it did go to court and you'd stand a good chance of avoiding the baliffs. If they don't get a court order they can't grab your stuff.

Keep looking for your thieving rat of a co-director, and don't give up. HMRC will come after you because they know where you are, but he will get his due eventually.

Try having a look at/posting a question on moneysavingexpert.com. You might find some people who have been in a similar spot. In the worst case, you'll find people who can advise you on how they dealt with debts to HMRC.

All the best. Z.

[lje]

There are three approaches which I would consider:

1. Did he take the director's loan legally? I don't know whether he needed a directors' meeting and signitures from all directors to get the loan. If he did need that and he didn't get it then it looks like fraud to me and should be reported to the police.
2. Get someone to find his address and then transfer the company to that address (if you can do this without his signiture). Then resign as a director. I know that you will still be liable but does he know that? If not he might suddenly think that it's all on him. The debt collectors could come knocking at his door not yours and he would have to pay and sort out any insolvancy as you would have resigned as a director and would not be responsible for decisions made after that point.
3. Get someone to find his address and then get a debt collection agency to give him a visit. You may think that he doesn't have anything of value but any money you get through this route leaves you in a better position than you are now. The debt collectors will go after his belongings and you might be surprised by how much they can get. It is his debt after all.

If my husband did this to me he'd end up in a lot of pain! Hope you get this sorted.

[MaryPoppins]

MP,

I know you can do without all this.

Assumptions for ease: There was an 18k CT debt and your co director has run off with it. There is now a 18k debt + 4.5k for the tax - reclaimable when the loan is repaid.

- If the loan is forgiven then the 4.5 falls on the co-director. Forgiving the loan might be beneficial (though you'll obviously nbever see the 18k again)

- HMRC no longer have preferential creditor status. Though this doesn't make much difference

- HMRC cannot attack you personally unless they can show on the balance of probabilities (in county court) or beyond reasonable doubt (in criminal court) that you were in some way complicit.

- HMRC cannot use the transfer of obligations provisions to move the debt to you unless it can be shown that you were negligent (if he was able to write cheques and you started chasing as soon as he did then I think this would be at least a difficult hurdle).

- HMRC can do everything they described. But with one important detail that may not have been entirely clear. They cannot take away YOUR belongings. They can take away the company's though.

- Given your co director was your partner this perhaps clouds the above somewhat.

- Should anybody turn up with any sort of warrant under distraint proceedings DO NOT LET THEM IN UNDER ANY CIRCUMSTANCES. Talk on the doorstep, whatever, but if you let them in you have granted access and that is not a good place to be.

- There is a significant question as to whether your co director has acted beyond their powers by taking the money. There may potentially be a criminal offence involved. However, even if there is, it does not remove the company's responsibility to settle it's dues.

- An IP is probably pointless. They are likely to simply charge you lots to do what you can yourself.

- A CVA (corporate equivalent of an IVA) might be a possibility. If it becomes clear to HMRC that they are not going to be able to transfer the debt to you then they might just go for it. Something would be better than nothing.

- If you, as a director of the company, which is forced into insolvency find yourself with a difficult credit file (and you will) then that's the way it is.

- If you believe you can get through it without (corporate) insolvency then try and agree instalments with HMRC. Do not be over optimistic with how much you can afford to pay. HMRC get VERY cross should you need to renegotiate an agreed settlement.

All of this assumes of course that you are trading as a standard limited company. If you are an unlimited company (unlikely in the extreme) then the debt is yours (or more accurately the members) anyway.

If any of this is helpful, then I'm pleased.

Thank you, that's a brilliant post. The insolvency practitioner I saw was surprisingly candid once the situation became clear. He admitted that for 5k they will wind the company up and deal with HMRC, which is nothing that won’t happen anyway.

I was assuming that as a director of a Ltd Co, any company debts can’t be settled using any of my personal belongings. Assuming our (so far rubbish) accountant bothers to file the company accounts, I will have these to prove that the company has no assets.

Our total CT liability is going to be around 28k. 10k of that is now in my possession, as he still has access to the personal business account. I removed the remaining 10k as a directors loan, in the same way he did, so legally speaking he’s done nothing wrong. I will obviously pay 10k of the CT, and will write to HMRC once chased for the rest, to explain that the remainder is unpaid due to the outstanding directors loan. I have already tried to explain this to them in advance, but have been advised that they’re basically not interested until the amount is due (unless I want to set up an installment plan).

Paying the remainder myself is frankly not really an option. I’ve now used all my savings during my longer than planned maternity leave, and although I’ve managed to land a (hopefully) long-ish contract, the rate is very, very low.

I have already changed the address on Companies House to the last address I held for him, but my address is linked to the business and I’m certain they will come to me. Finding him is not an easy task, and I’m unwilling to spend money on it - paying a debt collection agency will probably be a pointless exercise, given that they will probably only end up writing the debt off anyway.

I will be as honest as possible with HMRC, and can prove with bank statements that he took the funds this year. Ultimately however, the debt belongs to The Company, and he will probably have made himself very difficult to find. The CSA are apparantly unable to locate him through HMRC, for example.

The thought that this could impact my personal credit rating too is scary.

[Platypus]

as he still has access to the personal business account

Surely you can advise the bank that he 'stole' money from the account and you insist he is denied access to it. Or open another account with another bank and close that one?

If I were you, I'd be telling the police he stole the money. They can track him down if they want to.