Closing company but owe Corporation Tax

**eek** · 23 July 2013, 05:41

Originally posted by Biffa View Post

Hi,

I have set the wheels in motion to close my ltd company but due to an accountancy error I have no funds left to pay £589 corporation tax.
Any ideas on what I can do about this? Should I pay it out of my current income? Any help would be greatly appreciated.

Background:- The error somehow occurred in my last year of trading when all of a sudden, my accounts spreadsheet flagged that I had taken too much by way of dividends - (impossible, as I had not earned enough money!) When I spoke to my accountant about it, she assured me that this was normal and would rectify itself as the year went on) I suppose I should have been move assertive with my concerns but believed my accountant so left the issue to see if it would be ok - It wasn't, and it meant that my last payroll was swallowed up by paying all of the bills I had to pay for the year (CT and VAT mostly). I then ceased trading but then was hit with another CT bill for the £589 (for part of the last year of trading!) Obviously, as I am no longer trading, I cannot generate any money to pay this bill.

Well you need to repay it as trading while insolvent opens up a whole different world of pain (to you) and opportunity to add to it (for HMRC).

Next time you personally get £589 pay it to HMRC on the companies behalf and everything will be fine.

**malvolio** · 23 July 2013, 07:53

Point of order - your company, your directorship, your problem. Don't blame the accountant. You've also now got the chance to find out how corporate liabilities can become personal debts.

Pay it off somehow before the due date or it will get nasty.

**Craig at Nixon Williams** · 23 July 2013, 08:20

It sounds as if you have either declared more in dividends than you had retained earnings available to declare or have simply taken money from the company that has not been declared as a dividend (and thus you were not entitled to take)...either way you will need to repay the money to the company and settle the corporation tax liability with HMRC.

I'm unsure on what basis that your accountant would have said this was ok.

Craig

**Biffa** · 23 July 2013, 15:12

Ok. Thanks Craig. I kind of think it's my fault for not insisting in a stronger manner to my accountant that things were wrong.
I will endeavour to get the money back to my company ASAP.

**Wanderer** · 24 July 2013, 00:50

Originally posted by Craig at Nixon Williams View Post

I'm unsure on what basis that your accountant would have said this was ok.

I guess it's technically possible to take all the current company profits as a dividend and then have an expense arise (eg, salary, capital expenditure) which puts the company balance sheet into the red and there's nothing wrong with that so long as the company has a reasonable chance to trade its way out of the debt. However, when the company was closed a final dividend should have been declared out of the remaining profit leaving enough money to pay the company creditors. The books should have balanced when the final accounts were done so why the unexpected CT bill.

I think the accountant must have made a mistake in the books and allowed too much dividend to be paid. I'd ask the accountant to explain what happened, it's also possible that HMRC have made a mistake. Restating the accountants to correct the mistake may be a possibility but since the amount is small I'd be inclined (rightly or wrongly) to suggest that the easy way out is for the director to simply pay the Corporation Tax bill personally so the company can close down....

Closing company but owe Corporation Tax