IR35 Insolvency

[Analyzer]

Should being forced into inside35 (Umbrella) contract due to no other choice. Means my Ltd business account would be deprived of sufficient funds to satisfy both unsettled, and yet to be calculated EOY taxes.

Theoretically becoming insolvent. Has there been any mentions from the HMRC regarding this scenario, and what are others doing to deal with this situation?

[northernladuk]

Why would there be? You spending the money that's not yours and is tax money is your problem not theirs and changes to IR35 shouldn't affect it. That's running a business badly, not an effect of IR35.

By paying yourself dividends when you've no profit makes them illegal dividend so you need pay them back and Re do the accounts.

What are other people doing? Not doing it I'd guess.

How much are we talking here? Pay the company a DL to cover your taxes and then close it down?

[BrilloPad]

You have not put enough aside in your business account? I hope tou have the money personally?

<mod snip>

[BR14]

oh, dear. have to sell the flash motor and send the kids to state school then, eh?

too bad.

[Cirrus]

You can pay what you owe them in instalments. Just sell the Merc, cancel your holidays, stop buying prosecco, take in a lodger etc etc. It's tough but it happens all the time.

[escapeUK]

You can pay what you owe them in instalments. Just sell the Merc, cancel your holidays, stop buying prosecco, take in a lodger etc etc. It's tough but it happens all the time.

But those are his belongings, and the tax is owed by the Limited liability company.

"Once it has been incorporated, the business becomes a separate legal entity from its owners. That means the finances and assets of the individual and the finances and assets of the company are completely separate. If the company is sued or cannot pay its debts, the owners are only liable for the debt to the value of the money they have already invested in the business."

So that will be £1.

[jamesbrown]

But those are his belongings, and the tax is owned by the Limited liability company.

"Once it has been incorporated, the business becomes a separate legal entity from its owners. That means the finances and assets of the individual and the finances and assets of the company are completely separate. If the company is sued or cannot pay its debts, the owners are only liable for the debt to the value of the money they have already invested in the business."

So that will be £1.

Nah, sounds like the OP has been negligent, paying themselves dividends that are ultra vires, aka illegal under the Companies Act. In those circumstances, transferring the tax debt to the OP is perfectly possible.

[jamesbrown]

You can pay what you owe them in instalments. Just sell the Merc, cancel your holidays, stop buying prosecco, take in a lodger etc etc. It's tough but it happens all the time.

Yup, suck it up OP. You owe tax, and you're going to pay it one way or another. Better to take the easy route.

[Analyzer]

All situations are different.

+ Did not see being caught up in IR35 (long story)
+ Current EOY not calculated until August.

And no, I don't retain a sizable % for capital for future tax. I pay incrementally (but do pay). Point is with many large organizations blanket forcing inside IR35, I've had zero time to plan and therefore caught with this issue.

Curious if HMRC/or anyone had published an approach to this dilemma.

[Cirrus]

I've had zero time to plan and therefore caught with this issue.

You're missing the point. You don't need time to plan. You don't need to wait until your accounts are done. HMRC only take money from actual income. What you've done is spent income that was actually due to HMRC. That was reckless and negligent, so you need to pay the price. If you went in a Michelin restaurant and set about drinking super expensive wine, and then when the bill came you said "I didn't realise I was clocking up such a big bill", what do you think they would do?