Company cease trading

[NotAllThere]

The usual method is to treat the overpayment as a director's loan, rather than dividends, then pay it back to the company.

[Maslins]

Fair enough really and without being flamed I just wanted to get some views as I didnt really understand if CT would be owing as that can only be owing based on accounts being submitted showing a profit, so if Im not how does that work.

Without a corporation tax return being filed, HMRC won't know what they're owed.

However, deliberately not filing a tax return when you've had income which should have been declared on it is tax evasion, no different to the dodgy suppliers taking cash in hand.

Also worth bearing in mind that (if we naively assume HMRC's right hand knows what its left hand is doing) they'll be able to work out you've had a profit since the last filed accounts/tax returns due to VAT return figures.

I have seen cases where companies which owe money to HMRC have been struck off the register. Probably happens due to HMRC not having the staffing to stick their noses in in time. I wouldn't recommend on this though, as firstly, even if you get away with it, it's tax fraud, and secondly HMRC can get a court order to revive the company further down the line...so even if you sneak through the strike off, it doesn't mean you're home and dry.

[Wanderer]

Hi VM, no company year end is October 2011 so will have accounts to prep for next July. Basically I will have drawn cash that is not profit so becomes a loan which personally I could be held accountable to pay by HMRC, but thats only if I actually publish accounts. Its an interesting one really.

It's a fantastic idea and I'm sure no one has EVER thought of this before but unfortunately this is tax evasion and will land you in a tulip load of trouble.
I can see that you are having a bit of a over this one so here's a detailed scenario showing why HMRC don't tax evasion in the way you propose:

Let's say someone forms a company, the company does some trading, pays a salary of £7488 for the year (no PAYE/NI due), pays it's expenses (mostly to the director of course) and makes a profit of £30,000. £6,000 of that is put aside for Corporation tax and the rest is paid out to the director as a dividend. Now the director decides to take that £6,000 out of the company as a director's loan and attempts to quietly close the company down, writing off the director's loan and not ever filing accounts or paying the directors loan back. Effectively, the director/sole share holder has been paid without a penny of tax being deducted.

This is pretty much the scenario you propose. Can you see why this can't work? If it did then everyone would do it and rob HMRC blind. What happens is that HMRC will object to the company being struck as they cannot quantify it's tax liabilities and they won't allow the company to be struck until the paper work is filed and the tax is paid.

I didnt really understand if CT would be owing as that can only be owing based on accounts being submitted showing a profit, so if Im not how does that work.

So if you don't file any accounts then the profit the company made magically ceases to exist and you can take the money tax free? It be great if it worked that way, but we aren't in Teletubby land I'm afraid. Corporation tax is due on profits. Failure to account for those profits doesn't make profits or corporation tax liability go away.

I cant be the only person in the world who was merrily running the co. drew dividends only to find the income suddenly cut short.

No, but you have made a mistake by not doing your accounts properly resulting in you taking illegal dividends when there was no profit in the company to pay them out of. Now you have to transfer the illegal dividends to your director's loan account and figure out how much you have to pay back to the company so it can settle it's liabilities then close it down properly.

Don't get all tulipty with us when we give you grumpy answers to your questions because what you are trying to do is rape the system and that gives us honest folks a hard time.

[smalldog]

It's a fantastic idea and I'm sure no one has EVER thought of this before but unfortunately this is tax evasion and will land you in a tulip load of trouble.
I can see that you are having a bit of a over this one so here's a detailed scenario showing why HMRC don't tax evasion in the way you propose:

Let's say someone forms a company, the company does some trading, pays a salary of £7488 for the year (no PAYE/NI due), pays it's expenses (mostly to the director of course) and makes a profit of £30,000. £6,000 of that is put aside for Corporation tax and the rest is paid out to the director as a dividend. Now the director decides to take that £6,000 out of the company as a director's loan and attempts to quietly close the company down, writing off the director's loan and not ever filing accounts or paying the directors loan back. Effectively, the director/sole share holder has been paid without a penny of tax being deducted.

This is pretty much the scenario you propose. Can you see why this can't work? If it did then everyone would do it and rob HMRC blind. What happens is that HMRC will object to the company being struck as they cannot quantify it's tax liabilities and they won't allow the company to be struck until the paper work is filed and the tax is paid.



So if you don't file any accounts then the profit the company made magically ceases to exist and you can take the money tax free? It be great if it worked that way, but we aren't in Teletubby land I'm afraid. Corporation tax is due on profits. Failure to account for those profits doesn't make profits or corporation tax liability go away.



No, but you have made a mistake by not doing your accounts properly resulting in you taking illegal dividends when there was no profit in the company to pay them out of. Now you have to transfer the illegal dividends to your director's loan account and figure out how much you have to pay back to the company so it can settle it's liabilities then close it down properly.

Don't get all tulipty with us when we give you grumpy answers to your questions because what you are trying to do is rape the system and that gives us honest folks a hard time.

thanks for the explanation, Im getting SH*tty as a lot of people including you, are jumping to conclusions thats I was looking too rape the system as you put it, and going to take the proverbial, I was seeking clarity which I now have and I can therefore take the appropriate steps.

[NotAllThere]

If it helps, I think you were being a bit careless and gung-ho, rather than actively seeking to defraud.