Reply to: 8 month bench, corporation tax installments due

[cherhill]

Hi


i have been on bench for past 8 month, my corporation tax was due in summer.
about 13k, spoke to HMRC and they agreed for me to pay in installment of £1300 monthly.

today i phoned them and asked if i can reduce to £500
they took the payment but told me since it will take longer than 12 month to clear the payment
it may not be possible. anyway im waiting for someone from hmrc to call me to discuss.

today having read this page ..

Contractor Doctor: I can’t pay my tax bill to HMRC – what are my options?

"Simister says that the trigger point for insolvency is when the contractor’s limited company cannot realistically repay the debt within 12 months. If this is the case, the solution for most contractors is to undergo a voluntary liquidation. This would involve them agreeing an affordable payment plan to clear their debt to the company, using a licensed insolvency practitioner who the contractor has chosen."

now im concerned about my options. and fear it may all get worse ..

has anyone been in the same situation ? or can advise what i can do to proactively avoid situation getting worse

You have been out of work for 8 months and have debts and still you don't consider taking a permie role?

[turbowoowoo]

You have been around for a few months. Give it a little while longer and you will be able to sniff out a sockie more easily.

Once you have been here a while and spent endless hours providing good advice out of the goodness of your little heart to someone who you find out ultimately is sat at their keyboard laughing their sockies off at the flame war they started, you are likely to change your mind.

Until then, I suggest you practice waggling your finger and pontificating in the quiet of your own home so that you are well prepared for how you will ultimately feel. You will be able to handle the inevitable realisation much better that way.

HTH.

Fair point, well made. But I may have only been on here for a few months, but trust me I have been around the block a few years and am not a novice by any means. But will keep this is the back of my mind..

[northernladuk]

If this is not a wind up, one has to ask......

What, actually did you expect it to be like?

Free money for cars, loose women and champers baby!!

[tractor]

...

i have accountant, its my first year running business and wasnt expecting it to be like this

If this is not a wind up, one has to ask......

What, actually did you expect it to be like?

[junior contractor]

Do you have an accountant? If not, get one. If you do, get a different/better one. CT is not profit kicking around in your company a/c, it is not available for the company to pay to you (with the exception of loans and associated constraints). Your company will have been running with a negative balance for some time - wrong on various levels.

Again, get some competent professional advice. Hope it works out for you.

Pete.

i have accountant, its my first year running business and wasnt expecting it to be like this , i can do better in future years

[PeterF]

But you can't just transfer that £20k out and then back in again without considering loan/interest/BIK/etc implications, right?

[MaryPoppins]

The money IS his to spend. 20% of what you earn doesn't belong to HMRC, what you earn attracts tax of 20%. Setting the money aside as each invoice comes in is very sensible but is no requirement at all. Should you know you'll have to pay HMRC £20k and you have £20k of invoices outstanding there's no reason you have to keep £20k in your account.

It makes sense to treat it like the money is HMRC's though, I'm nit-picking a bit.

Yes, true, I know what you mean.

[d000hg]

This. This is precisely what my ex did, in fact, as it turned out. Had absolutely no concept that the money was not personally his to spend, and was then unable to pay his tax bill.

The money IS his to spend. 20% of what you earn doesn't belong to HMRC, what you earn attracts tax of 20%. Setting the money aside as each invoice comes in is very sensible but is no requirement at all. Should you know you'll have to pay HMRC £20k and you have £20k of invoices outstanding there's no reason you have to keep £20k in your account.

It makes sense to treat it like the money is HMRC's though, I'm nit-picking a bit.

[MaryPoppins]

I'm not to sure. I can name at least 5 contractors I know that withdraw every penny the receive from their accounts leaving nil in there and then expect to pay taxes off with next years potential earnings. I know this because all 5 got canned from the role and shat themselves hence 'fessing up about their problem. Stupid situation cause it's just bad planning, they lose it at the beginning of next year anyway. There are enough stupid people out there that do this.

This. This is precisely what my ex did, in fact, as it turned out. Had absolutely no concept that the money was not personally his to spend, and was then unable to pay his tax bill.

[TheFaQQer]

SO someone (albeit in the position because of being an arse) asks for some advice and all most of you cant do is waggle your finger and pontificate!

The answer I gave in post 6 details the OPs financial position, based on this and his other thread. It explains clearly what he should do - repay the directors loan to the company, reduce the debt to HMRC using the £5k repayment and then repay the HMRC debt in 8 months at £500 a month as he has offered to do.

He has £20k in his bank account, £5k of which is a loan from the company, but for some reason doesn't want to recall that loan to repay the company debts.

The alternative is bankruptcy and hoping that HMRC don't see him as being negligent and go after the directors personally.

[tractor]

SO someone (albeit in the position because of being an arse) asks for some advice and all most of you cant do is waggle your finger and pontificate!

fwiw it does sound as though you were insolvent months ago and as such should have taken action.

Please speak with your account urgently, do not put any more of your money into the company and do not take any more out!

You have been around for a few months. Give it a little while longer and you will be able to sniff out a sockie more easily.

Once you have been here a while and spent endless hours providing good advice out of the goodness of your little heart to someone who you find out ultimately is sat at their keyboard laughing their sockies off at the flame war they started, you are likely to change your mind.

Until then, I suggest you practice waggling your finger and pontificating in the quiet of your own home so that you are well prepared for how you will ultimately feel. You will be able to handle the inevitable realisation much better that way.

HTH.

[turbowoowoo]

SO someone (albeit in the position because of being an arse) asks for some advice and all most of you cant do is waggle your finger and pontificate!

fwiw it does sound as though you were insolvent months ago and as such should have taken action.

Please speak with your account urgently, do not put any more of your money into the company and do not take any more out!

[tractor]

...

I'd have to dip in to whats left of the Corp Tax just to pay for that. Her hourly rates are astronomical.

You need to go to uSwitch or something and get on the right tariff

[tractor]

...

Agreed, I've met contractors who are exactly the same I recent paid my corporation tax way before it was due and mentioned it to another contractor. He was both shocked an appalled and said why not do something else with it.

It's amazing how few realise that atm, HMRC rate of interest far surpasses any bank

[northernladuk]

You wouldn't need to, NortherLadyUK's pillow talk is as prolific as it is legendary.

It's probably paying her hourly rates for conversations that caused me to dip in to the CT in the first place.