VAT-Caught between a rock and a hard place.

[craig1]

It might be helpful for me to point out at this stage that any VAT debt will "the company's" not yours, insolvency may be the best option for the company which could be where your accountants are going with the closing down chat

HMRC have a very nasty habit of applying for and getting through the veil of incorporation for companies that go down the pan owing them money. It's nowhere near as simple as that and some serious advice is necessary before thinking about it.

[geoff from contracta IOM]

HMRC have a very nasty habit of applying for and getting through the veil of incorporation for companies that go down the pan owing them money. It's nowhere near as simple as that and some serious advice is necessary before thinking about it.

On what exactly is this statement based ? A company's debt is a company's debt unless directors have been dishonest or negligence can be proved , no suggestion of either here and the threshold of proof is pretty high. My advice is find out the extent of the liabilities if any and if more than you have to pay a liquidator probably about 5 -6 K , then you should liquidate. It is essential to get an accurate statement of the companies assets and liabilities first , if the company is insolvent you are actually committing an offence by continuing to trade and not liquidating it .

[Jerry]

On what exactly is this statement based ? A company's debt is a company's debt unless directors have been dishonest or negligence can be proved , no suggestion of either here and the threshold of proof is pretty high. My advice is find out the extent of the liabilities if any and if more than you have to pay a liquidator probably about 5 -6 K , then you should liquidate. It is essential to get an accurate statement of the companies assets and liabilities first , if the company is insolvent you are actually committing an offence by continuing to trade and not liquidating it .

I've been in this situation (Actually narrowly avoided it) due to my main client, a FTSE listed company, going bankrupt and owing me 4 months money. I know...i should have walked earlier but i didn't.

When HMRC find out that you are closing the business through insolvency, they will first seek to demonstrate that you have taken dividends from the business. Salary is considered to be acceptable. If you have done this and not paid taxes, then this is considered to be fraudulent. They will therefore seek to (i) have the debts levelled against you personally and (ii) have you struck off as a director.

I managed to come to a payment arrangement (i only owed £18k, and i had found another contract). But there is little understanding on their part that actually, you have to live. And to live, you have to draw money.

Of course, if you decide to tow the line and NOT draw that money out of the business until its financial situation is sorted, you would starve to death. Closing a business takes some months, even if its solvent. And the DWP won't pay you benefits until it is closed.