Fight to save Ltd or not

[uk contractor]

Currently I'm undecided.............

Some of you may be aware that I was originally going to post this under a new account, because to be honest it's quite embarrassing, but the more I think about it, it's not embarrassing at all. The government forcing through IR35 and the lack of government support for Ltd company directors in their coronavirus support packages have gotten me to this point. Sure the directors loan is high but I intended to chip away at that overtime. Here goes....

I have been contracting a while but been on the bench now for several months, some of it by choice. My war chest has become depleted and the bounce back loan will run out by the end of this year. I'm looking at the market and it's just dreadful. So, my question is this, is it worth fighting to save my Ltd company when there are a number of financial issues:

1. Corporation Tax due end of year (£ 18k)
2. VAT deferred (£6k)
3. Bounce back loan (£30k)
4. Directors Loan (£ 30k)

I mean, it's going to take me forever to repay all of that. It would assume I can remain in outside IR35 contracts without break for many years, which seems unlikely. Instead of trying to do this, why not just walk away and take an umbrella/PAYE role instead. Sure, the net monthly would be less but I wouldn't have to try and pay all this off. The government is backing the bounce back loan so I could just walk away from that. The Directors Loan would probably be hung on me as 'dividend untaken'. What about the CT and VAT?

Let me close by saying that this is something I never wanted to do. At the start of this year the company was in a decent enough state. From the list above all taxes would have been paid on time and I wouldn't have needed the bounce back loan. My project was that by the end of this year I'd have tens of thousands in my war chest. Sadly, IR35 and the pandemic, in particular the governments lack of a support package for Ltd company directors, have both conspired against me. I am of course praying that something comes along to avoid all of this. Like many others I guess.

Thanks for reading.

Good luck hope it all works out but £84K is a massive hole to climb out of & realistically I would start protecting any assets you have left like your main property from being eventually seized if you cannot find a new income stream pronto.

The IT job market is really in a terrible state right now hope does not pay the bills like so many of us you are looking at a long time on the bench as it does not appear to be turning around anytime soon & supply & demand factors mean you would have to work for low rates to secure any role right now.

Best Wishes but look into preserving your main home at least so you have somewhere to stay! All any accountant will advise is similar & perhaps downsizing to raise capital.

HMRC will aggressively pursue you in a few months for their money they are not known for being very helpful or sympathetic unfortunately.

[GregRickshaw]

Good luck hope it all works out but £84K is a massive hole to climb out of & realistically I would start protecting any assets you have left like your main property from being eventually seized if you cannot find a new income stream pronto..

Are you able to expand/advise/help on the best way to protect ones main property?

[oliverson]

Good luck hope it all works out but £84K is a massive hole to....

Appreciate your comments but the headline figure makes it sound worse, not to say that it doesn't bother me. Say I land work next month (I've only just started looking properly to be fair), then the only way I'm worse off than at the start of the year is the bounce back loan. That's just over £ 500 a month from April 2021. When in contract it's usually London finance, so the rates are good, even better if there's no need to incur flat rental / travel expenses due to the WFH. All it takes is a year on London rates without the expenses and this problem is dead, aside from the directors loan. But the heat is definitely on I'd agree.

[uk contractor]

Are you able to expand/advise/help on the best way to protect ones main property?

Sell all your non essential assets & pay your mortgage & debts off!

[wattaj]

'I think' we are allowed around £10k before the extra interest and tax kick in so aim to get it to around that figure.

BIM is due on anything over 10K. Charging a "commercial" rate of interest ameliorates this a bit.

[uk contractor]

Appreciate your comments but the headline figure makes it sound worse, not to say that it doesn't bother me. Say I land work next month (I've only just started looking properly to be fair), then the only way I'm worse off than at the start of the year is the bounce back loan. That's just over £ 500 a month from April 2021. When in contract it's usually London finance, so the rates are good, even better if there's no need to incur flat rental / travel expenses due to the WFH. All it takes is a year on London rates without the expenses and this problem is dead, aside from the directors loan. But the heat is definitely on I'd agree.

Good lucky buddy but London Finance is pretty much dead contracts wise for many months now & not showing any signs of life anytime soon! Be realistic to preserve what you do still have left the supply & demand factors alone stack the odds heavily against you finding a decent paying contract in this current environment!

[wattaj]

Who says the company is unviable? I could land a contract to start in a few weeks and this problem goes away...

Sadly, you do. The company has no income and, it would seem, very little / no reserves... unless you get a new contract. There is no guarantee of that new, company-saving contract coming in any time soon and your company is in its death throws until it does.

Good luck, but prepare for the worst now. Anything better than that is going to be a bonus.

[GregRickshaw]

Sell all your non essential assets & pay your mortgage & debts off!

I see you mean getting into problem with the mortgage lender rather than tax collectors. Are there ways of protecting your home if you have no mortgage but tax collectors?

[oliverson]

Sadly, you do. The company has no income and, it would seem, very little / no reserves... unless you get a new contract. There is no guarantee of that new, company-saving contract coming in any time soon and your company is in its death throws until it does.

Good luck, but prepare for the worst now. Anything better than that is going to be a bonus.

Been in this position before in the financial crisis. Remember the bank manager saying my business wasn't viable. I turned it around and I'll do the same again this time. I'm now angry. I have only just started looking proper btw. Hopefully I'll get to post a boom message on this forum in the coming weeks and avert a disaster.

[wattaj]

Been in this position before in the financial crisis. Remember the bank manager saying my business wasn't viable. I turned it around and I'll do the same again this time. I'm now angry. I have only just started looking proper btw. Hopefully I'll get to post a boom message on this forum in the coming weeks and avert a disaster.

As I say, good luck; I wish you well. But please be realistic and prepare for the worst now.