Directors loan letter

[bebop50]

Hi, a friend an I started a company to run a garage. Just to have a place to do our own cars but never traded. It got too expensive for power and rent and I gave it up. But I didn’t close the company or file accounts. We Opened it 2008 It was struck off companies house in 2020. There was only outgoing which came from our own personal money.
I’ve recieved an HMRC letter that is saying that I may have disguised remuneration. To report it I have to send a 2018-19 tax return by January 2023. It says I was employed by the company and that I used a tax avoidance scheme such as a directors loan and that I MAY of received between 2010-2019. I never received any type of money from this company at all. I was employed at the time full time on paye for a totally different ftse 100 company. If I don’t send it HMRC will send me a determination and pay the amount in 30 days or send the tax return.
im worried that maybe people who took over the premises in 2010 have been using my name on their payroll and I have no idea what to do. I’ve never had a directors loan.
I am now an IT contractor and first self assessment was in 2019-20

[Guy Incognito]

Do the tax return - just show the PAYE you paid.

[GregRickshaw]

Are you sure they want your returns from the garage and not from your new IT contract?

The Directors Loan as a tax avoidance is possible I guess but it sounds like you never used any company money.

When you say outgoings from your personal money did you pay into your business account your personal money and then use it?

As an aside the DL you can use around £10K (someone will have the correct amount) before it attracts the surcharge/interest and more Corporation Tax never heard it called DR or TA before but I guess it's possible.

Let's assume they are talking about the garage then HMRC have probably estimated everything and are now looking to you to fill in the gaps for them.

They have probably noted you were self employed back then and now have come back on the radar...

As has been said you'll have to do the SA and declare exactly what you did, maybe get a specialist to help you. If you still have the books it won't be too hard.

[bebop50]

Are you sure they want your returns from the garage and not from your new IT contract?

The Directors Loan as a tax avoidance is possible I guess but it sounds like you never used any company money.

When you say outgoings from your personal money did you pay into your business account your personal money and then use it?

As an aside the DL you can use around £10K (someone will have the correct amount) before it attracts the surcharge/interest and more Corporation Tax never heard it called DR or TA before but I guess it's possible.

Let's assume they are talking about the garage then HMRC have probably estimated everything and are now looking to you to fill in the gaps for them.

They have probably noted you were self employed back then and now have come back on the radar...

As has been said you'll have to do the SA and declare exactly what you did, maybe get a specialist to help you. If you still have the books it won't be too hard.

Never took anything a bill comes in and we had to split it. Because it never traded we didn’t keep books. Just handed the premises back. And don’t do anything.
Seems that for some reason hmrc think I was self employed when I wasn’t.
I’ll have to find someone to help with this.

[GregRickshaw]

Never took anything a bill comes in and we had to split it. Because it never traded we didn’t keep books. Just handed the premises back. And don’t do anything.
Seems that for some reason hmrc think I was self employed when I wasn’t.
I’ll have to find someone to help with this.

HMRC really don't know anything concrete unless you tell them. So I suspect you did register as a business and you two as employees, so when you went back to work FT you possibly didn't tell them you were no longer self employed.

Now you have popped up on the radar they are trying to put two and two together.

I 'think' you will be okay if you call them, however the not ever putting your 'books' or year end accountants may earn you a fine, you have obligations as a director of a LTD company etc.,

Start talking to them as soon as you can, then depending on the call you may need a specialist.

Good luck and let us know how you get on

[Maslins]

Hard to know for sure from the info, but what I guess might be the case is:
- you set up a company, never submitted the formal docs you should.
- HMRC therefore have no idea whether it made £millions or did nothing.
- you know it did (virtually) nothing, but HMRC don't know that.
- the company's now struck off.
- potentially the company could have received loads of money that you withdrew, never declared it anywhere, no taxes paid.
- HMRC are suspicious, or possibly not suspicious but just asking the question.

I am baffled that if it was incorporated in 2008, and never filed accounts, that it wasn't until 2020 that it was struck off?! Would expect that to happen after maybe 2-3 years (ie 1 year after first submissions due became late), not 12 years!

Speak to HMRC, say (assuming you're happy it's true) that the company never had any income, only incurred some expenditure, and the dates this started/stopped. That might be the end of it. Alternatively they may ask for some evidence. At worst that can be very tricky, as it's hard to prove you didn't have any income from it. Eg how do you prove nobody ever paid you in cash for work.

There is a possibility HMRC have you on some list, maybe they have info to suggest your spending/what you own seems out of kilter with the earnings they can see you having. Hence they're suspicious you may have undeclared income. If this is the case, worth considering whether you had any unexpected (but entirely legitimate) windfalls during that time? Eg inheritance, non trivial lottery win etc.