HMRC Notice of Distraint and Threatened Bankruptcy

[AnthonyG6]

I have been reading this site for the past few days and the advice on here for other people has been great and I have learned a lot from this.

 

I’ve been the Director of my own Ltd Company for the past 4 years after the Government legislation effectively closed down Multi Service Company schemes. I chose the Limited Company route as this was the most tax efficient route, as I am sure many others in my situation did.

 

This had worked alright for me as I was putting money aside every week to meet my Tax payments as they became payable. But this year I don’t have enough put aside for paying the Corporation Tax because the money I normally put aside, I’ve had to use for personal purposes. My end of year accounts show that around £13K will be due to pay, I have not submitted the End of Year accounts yet. I was hoping that I would be able to come to some sort of payment plan with HMRC to pay this in instalments.

 

The problem is HMRC recently contacted me and asked me to submit Self Assessment Tax Returns for the last 4 years. I didn’t realise that I had to do these (I know ignorance is no excuse) but after doing them it turns out I owe HMRC another £12K in tax. I have called them to try and agree a repayment plan, but they have refused and have now submitted a Notice of Distraint! I called them again to plead with them to allow me to pay it off in instalments and this debt is only there because it has built up without my knowledge. Had I known I would have budgeted to pay it off when it became due.

 

They will not budge and have demanded full payment immediately and have threatened me with Bankruptcy!! What would happen to the Corporation Tax debt, (although accounts not filed yet) my Ltd Company and my SA Tax if they make me Bankrupt? I am still working through my Ltd Company, should I go PAYE or Umbrella, or should I open another Ltd with my wife as Director and me a shareholder?

 

If I become Bankrupt will the OR take my wife’s income into consideration as my monthly income, she is not currently working but in case she created a Ltd? Would she become Bankrupt with me or remain unaffected? We don’t have any joint accounts.I live in a rented house and don’t really have any assets of any value, just a car worth around £1K.

 

If I petitioned for BR myself, would that stop the Distraint? Would I get in trouble for the using the money that I should have put aside for the Corporation Tax? What will the OR ask me?Please, please, please any advice would be very much appreciated.

Edited December 13, 2012 by slick132
formatted with paragraphs

[BazzaS]

You likely need the advice of an accountant.

 

As for opening another Ltd Company with your wife as Director : if you were made bankrupt, this may well be seen as a "shadow directorship" which is forbidden - especially if the company is essentially the same as your previous company. This would be exacerbated if your existing company eventually gets dissolved (insolvent) : in which case you might get forbidden to be a director (seperately to the bar to directorship of bankruptcy)

 

Is your personal tax liability correct? If you are a basic rate taxpayer only you get credit for corporation tax paid on your dividends.

Edited December 11, 2012 by BazzaS

[AnthonyG6]

Thank you for your reply. My returns were prepared by RSM Tenon so I just assumed they were correct? My accounts company are Brookson, so I will get onto them and get them to check if I should have got credit because of the CT already paid by my Ltd Company.

 

If it turns out that the liability is correct and given the fact HMRC have refused to let me pay by instalments, do you think it would be better for me to petition my own BR or just wait it out for HMRC to do it to me?

 

Can anyone recommend a company that does bankruptcies and also a good Umbrella Company?

 

Many thanks.

[honeybee13]

Hello there.

 

I'm afraid we can't recommend companies as it's against CAG rules. I would have thought your accountant would know a bankruptcy practitioner.

 

I'm not sure about umbrellas companies but will ask someone on the site team who has had dealings with one. As with any other company, you could try a google search for the name with 'problem'.

 

My best, HB

[AnthonyG6]

Thank you honeybee13.

 

I am now trying to borrow the money from friends and also sell my car to pay the SA Tax of £12K. I am going to try and avoid becoming BR as I think the restrictions it will place will be far more problematic. If I went BR I would have to work PAYE which would mean I would earn around £13K less per year than with a Ltd Company.

 

Now my problem is that, I won't be able to pay the Corporation Tax!! Would I be able to open another Ltd and carry on as before and let the current remain dormant for 3 months and apply for it to be Struck off? Would HMRC still come after me? Could I get in trouble because I've mis-managed it as a Director? Could I still be made Bankrupt?

 

Any advice would be much appreciated.

[honeybee13]

Hello again.

 

You do have a few problems, don't you? I'm not an expert, but I think you should find out much more information before opening another company. I thought HMRC had tried to stop directors doing this because of fraudulent activity in the past. I'm not saying this necessarily applies to you, but if I've understood the rules you could be caught up in the same thing.

 

I'll flag your thread for site team attention in case anyone can help.

 

HB

[AnthonyG6]

Thank you HB you're a star!

[slick132]

Hi Anthony,

 

If you were being paid a monthly salary from your Ltd Co, you or the accountant should have ensured PAYE was being operated correctly and currently. PAYE tax and National Insurance (Employers and Employees) Contributions should have been paid over to HMRC on a monthly basis.

 

Do you have an accountant that has an overview of your Ltd Co and of your personal tax positions. If not, you need to set up an urgent meeting to sort out matters including Corporation Tax PAYE Tax and NI Contr'ns.

 

Then you can decide how best to proceed and your accountant should be able to help you set up payments that HMRC find acceptable.

 

I think the intransigent stance of HMRC may be down to the fact that no PAYE was operated to account for payments monthly.

 

I would also have expected your accountant to advise you on how matters should have been dealt with on a holistic basis with regard to the Ltd Co and your personal tax affairs. However, if the acc't only dealt with the preparation of the Ltd Co accounts, this may have been ignored.

 

[BazzaS]

Thank you honeybee13.

 

I am now trying to borrow the money from friends and also sell my car to pay the SA Tax of £12K. I am going to try and avoid becoming BR as I think the restrictions it will place will be far more problematic. If I went BR I would have to work PAYE which would mean I would earn around £13K less per year than with a Ltd Company.

 

Now my problem is that, I won't be able to pay the Corporation Tax!! Would I be able to open another Ltd and carry on as before and let the current remain dormant for 3 months and apply for it to be Struck off? Would HMRC still come after me? Could I get in trouble because I've mis-managed it as a Director? Could I still be made Bankrupt?

 

Any advice would be much appreciated.

 

Companies House might decline a dissolution without the accounts being filed.

HMRC may well oppose any strike-off if (once accounts are filed) there is CT due : your existing accountants you have mentioned can advise on this.

 

Your previous post noted " But this year I don’t have enough put aside for paying the Corporation Tax because the money I normally put aside, I’ve had to use for personal purposes"

 

However, the money wasn't yours to use, if you took it as dividend when CT was owed ......

 

If you took it as salary, then you could take it, but if you were using a Ltd Co. as a (legitimate) means to reduce your tax liability , this is usually done by only paying salary up to your personal tax allowance : was the money you took out "instead of putting it aside for CT" taken as salary or dividend?

[AnthonyG6]

Hi Slick,

 

I was paying the PAYE, NI and VAT every quarter. The outstanding liability of £12K has come about because I have only just done SA for the last 4 years.

 

Thanks.

[BazzaS]

Hi Slick,

 

I was paying the PAYE, NI and VAT every quarter. The outstanding liability of £12K has come about because I have only just done SA for the last 4 years.

 

Thanks.

 

Where has the 12k figure come from if you were paying the PAYE?. Are you a higher rate tax payer and this is SA tax due (from higher rate) on the dividends?

 

Is any of the 12k based on a "determination" from HMRC where they have estimated a figure given your lack of returns, that they might reasses now your returns are done?

 

The details of how the extra 12k came about (and if it is actually owed!) might help : given you were paying the PAYE.

[slick132]

I have to agree with Bazza - to owe tax of £12K over 4 years suggests circumstances which are significantly different from the norm.

 

It also appears that your accountancy and tax advice and/or planning was poor. If your accountant or tax advisor had a full picture of your income from all sources, you would have been warned about your liabilities so you were able to pay them on time.

 

You'd have to have received approx £15K per year over 4 years with no tax deducted (self-employed or investment income) to owe £12K.

 

So, if we are to be able to offer any useful advice to you, we'd need more info about the manner in which the £12K was found to be owing.

 

Edited April 23, 2013 by slick132

[AnthonyG6]

Hello Everyone,Just an update to let you know that I sold my car and borrowed some money from friends to pay off the £12K SA Tax. Which was a huge relief as it prevented the Distraint and BR etc. I still have outstanding CT to pay and CH have just issued a Notice to Dissolve my company because I didn't submit my Annual Returns. I have started a new thread about whether I should let the company get struck off with the outstanding CT and open another Ltd Company and carry on working as normal. What would the consequence be? Can HMRC come after me for the unpaid CT? Any advice here or on the orther thread will be greatly appreciated.Thank you.

[honeybee13]

Here's a link to Anthony's new thread.

 

http://www.consumeractiongroup.co.uk/forum/showthread.php?389298-Companies-House-Notice-of-Strike-Off-Tax-Implications-Help-Please%282-Viewing%29-nbsp

 

HB