Reply to: Corporation Tax Struggles and closing down ltd company

[Clare@InTouch]

As an aside, what is generally the best way to ensure this type of thing can't happen? VAT + ~25% of each invoice into a savings account? My instant acess savings account is paying something daft like 0.02%.

If you transfer 20% of each invoice into a business savings account (not your own personal savings account, or there could be tax implications) then that should be more than enough to pay the tax when it falls due.

[BillHicksRIP]

As an aside, what is generally the best way to ensure this type of thing can't happen? VAT + ~25% of each invoice into a savings account? My instant acess savings account is paying something daft like 0.02%.

[Wanderer]

But what I am trying to say is, if I stop trading as a LTD company and I accept a permanent possition with someone, I wont be able to afford my 3rd years CT payments. So in that case, will my company just get struck off? Or will I need to work out a payment plan from personal account?

Hey yeah, great idea. Start a LTD company, trade for a couple of years, take all the money out and then just close it down without paying Corporation Tax! I'm sure HMRC won't mind at all if you do this but you should give them a quick call to check first.

Seriously though, what you have to do is keep the company open then take out a personal loan to pay your company back the money you borrowed from it's funds which should have been set aside to pay corporation tax. Once all that's squared, you can shut the company down.

[xchaotic]

I am owed a little bit back from my current assignment 4 weeks in arrears plus the 4 weeks notice period which should cover the 7k. However I will then struggle to pay the 3rd years CT on 1st Jan 2012.

Everything you will receive you should pay CT on it.
If some of clients went under or for some other reason didn't pay you you can write it off and don't have to pay CT on it obviously.

You should have set aside the money for the taxes owed (CT VAT etc), pay it back even if you think you'll be paying back from you permie salary, it's money you should have never given yourself in the first place.
With accounts in order and lessons learned no need to close down the Ltd Co, just keep it dormant and arrange a deal with an accountant to do minimal paperwork while it's dormant.

[stek]

I could be wrong but I'm sure that the HMRC can come after the directors for unpaid CT, under the old 'lifting the veil' rules.

Especially under one-man companies like wot we have.

[jmo21]

Yep, I have.

Well done, you're not a total dumbass then!

[LisaContractorUmbrella]

HM Revenue & Customs: What to do if you can't pay Corporation Tax

See link above from HMR&C site
HTH

[somecompany]

You'll have budgeted for next years accountants fee too of course?

Yep, I have.

[jmo21]

Thats what I am trying to find out from them and the best way forward, but as I said I'm not getting much help out of them.

What I want to know is, if I leave my current contract and take on a permanent position, I will get enough pay after I leave to settle 09\10 tax bill, 4 weeks pay for the notice period and 4 weeks from arrears. However the issue will come in when it comes to pay for 10\11. Would I be able to come up with a payment plan with HMRC from my personal account?

You'll have budgeted for next years accountants fee too of course?

[somecompany]

Not your Accountants fault per se... but what the feck have they been doing letting you take money willy nilly without any advice....

Thats what I am trying to find out from them and the best way forward, but as I said I'm not getting much help out of them.

What I want to know is, if I leave my current contract and take on a permanent position, I will get enough pay after I leave to settle 09\10 tax bill, 4 weeks pay for the notice period and 4 weeks from arrears. However the issue will come in when it comes to pay for 10\11. Would I be able to come up with a payment plan with HMRC from my personal account?

[prozak]

To be blunt, you've made an arse of it, so blaming your accountant doesn't wash, the basic calculations are really not difficult.

Even just setting aside 21% of every invoice (the pre-vat figure, and forget about the expenses side of things) and you would be able to easily keep track of what your company owes.

Agree.

It is NOT your money until you work out a legal way to get it into your hands.

You cannot pay a dividend without profit or capital.

I do not think it is legal as you are then trading insolvent (or something like that ).

you must have a loan account, which to be quite frank, is also going to land you in the SH!T.

Not your Accountants fault per se... but what the feck have they been doing letting you take money willy nilly without any advice....

[jmo21]

To be blunt, you've made an arse of it, so blaming your accountant doesn't wash, the basic calculations are really not difficult.

Even just setting aside 21% of every invoice (the pre-vat figure, and forget about the expenses side of things) and you would be able to easily keep track of what your company owes.

[somecompany]

But what I am trying to say is, if I stop trading as a LTD company and I accept a permanent possition with someone, I wont be able to afford my 3rd years CT payments. So in that case, will my company just get struck off? Or will I need to work out a payment plan from personal account?

[somecompany]

Taking a personal loan would be fine.

A company should always have enough money set aside to pay it's CT. If you haven't, and yet you're showing a profit on which tax is due, presumably this means you've taken too much in dividends? Depending on how your accountants have treated this it may well have created a loan account (you owing money to the company) so you repaying it via a personal loan would be the correct way forward.

Yeah, turns out I've been taking to much in dividends, it looks like my accountant just wrote up my books and final accounts as if I was taking the normal amounts and didnt overpay myself.

[Clare@InTouch]

Taking a personal loan would be fine.

A company should always have enough money set aside to pay it's CT. If you haven't, and yet you're showing a profit on which tax is due, presumably this means you've taken too much in dividends? Depending on how your accountants have treated this it may well have created a loan account (you owing money to the company) so you repaying it via a personal loan would be the correct way forward.