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Fight to save Ltd or not

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    Fight to save Ltd or not

    Delete me !!!

    #2
    Originally posted by oliverson View Post
    Delete me !!!
    I've a feeling you don't want the mods to take that too literally
    'CUK forum personality of 2011 - Winner - Yes really!!!!

    Comment


      #3
      Originally posted by oliverson View Post
      Delete me !!!
      Originally posted by northernladuk View Post
      I've a feeling you don't want the mods to take that too literally
      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.

      Comment


        #4
        Have you taken any out of the company since it was clear it was unviable (other than the directors loan)?

        An argument could be made by creditors that you were trading while insolvent or not a viable business and therefore not performing your fiduciary duties as a director.

        Comment


          #5
          I think that you're going to have a problem with that Directors Loan: S455 will kick in 9 months after YourCo's EoY if it's not paid back / declared as a dividend and you'll be liable to the 32.5% withholding tax.

          Were you aware of that?

          Also, I don't know how one would convert a directors loan into a dividend if there is no money in the company.
          Last edited by wattaj; 27 August 2020, 11:03. Reason: Clarity.
          ---

          Former member of IPSE.


          ---
          Many a mickle makes a muckle.

          ---

          Comment


            #6
            I sympathize with your situation. Countless others will be in the same circumstances.

            However, I suspect it may be harder than you think to just walk away from all this, including the BBL and certainly all taxes due. The BBL is in a somewhat different category because it was, afterall, intended to keep you afloat. It remains to be seen how hard the banks and, ultimately, the gov't will push back on this. You may be able to walk away from that. However, the taxes shouldn't have been spent. The director's loan will definitely be due and the liquidator will pursue you for that as money owed to creditors.

            Comment


              #7
              Originally posted by wattaj View Post
              I think that you're going to have a problem with that Directors Loan: S455 will kick in 9 months after YourCo's EoY if it's not paid back / declared as a dividend and you'll be liable to the 32.5% withholding tax.

              Were you aware of that?

              Also, I don't know how one would convert a directors loan into a dividend if there is no money in the company.
              The directors loan has lingered, more a relic from the last financial crisis. I've paid the tax on that already.

              I would imagine I'd pay tax on the Directors Loan as personal income.

              Comment


                #8
                Bottom line, that 30k director's loan will need to go back, and that will pay the CT, VAT and some of the BBL too (and it will have to, there will be no getting away with that anymore as you cannot extract further cash when the business is no longer viable).

                Comment


                  #9
                  Originally posted by oliverson View Post
                  The directors loan has lingered, more a relic from the last financial crisis. I've paid the tax on that already.
                  So that is more credit then (I forget the timeframe for getting that back, but I think it's quite long).

                  Comment


                    #10
                    Originally posted by jamesbrown View Post
                    I sympathize with your situation. Countless others will be in the same circumstances.

                    However, I suspect it may be harder than you think to just walk away from all this, including the BBL and certainly all taxes due. The BBL is in a somewhat different category because it was, afterall, intended to keep you afloat. It remains to be seen how hard the banks and, ultimately, the gov't will push back on this. You may be able to walk away from that. However, the taxes shouldn't have been spent. The director's loan will definitely be due and the liquidator will pursue you for that as money owed to creditors.
                    It may still keep me afloat. I have just over 3 months remaining to find something, which remains my main objective.

                    Comment

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