Company Debt to VAT man and personal debt

tedders007

Hi

I'm seeking advice for a friend who is in a dark place at them moment.

He has a limited company that is heavily in debt, mainly with the VAT (£30k+). As he hasn't opened any post or posted any accounts to company house or paid any bills for two years, Company House have sent a note saying they are dissolving the company.

On top of that he and his partner have defaulted on their mortgage a few times, he has not paid his own tax or NI and defaulted on personal loans etc and are now selling their house and splitting up.


The plan is for the house sale to go through, he will sign over the proceeds to her and the kids so they can downsize and start again, he will throw his hands up and take what is coming to him. He has signed something to allow her to be sole recipient of the proceeds and they don't plan to pay off his business debts.

They have a buyer for the house and will exchange once the eviction order has been sorted but it won't complete for a month or two (don't ask, just a blood sucking property developer), so my question:

Assuming that the dissolving of the company will alert the VAT man that he will not be getting his money (there are no assets in the firm). I don't think my friend has been knowingly fraudulent, but obviously negligently running an insolvent company for 2 years, can the VAT man freeze his personal assets and prevent the house sale? Once he has exchanged, can his assets be frozen?

My friend is an alcoholic and a waste of space but I am worried for his partner and their kids. She thinks that the exchange and the deposit will solve all her problems, but I'm worried that the debts of his limited company, although limited, still might stop the house sale and bring their world tumbling down.

Does anyone know how these things work and what the risks are?

antonic

Please see my comments in RED

tedders007 wrote: »

Hi

I'm seeking advice for a friend who is in a dark place at them moment.

He has a limited company that is heavily in debt, mainly with the VAT (£30k+). As he hasn't opened any post or posted any accounts to company house or paid any bills for two years, Company House have sent a note saying they are dissolving the company.

On top of that he and his partner have defaulted on their mortgage a few times, he has not paid his own tax or NI and defaulted on personal loans etc and are now selling their house and splitting up.


The plan is for the house sale to go through, he will sign over the proceeds to her and the kids so they can downsize and start again, he will throw his hands up and take what is coming to him. He has signed something to allow her to be sole recipient of the proceeds and they don't plan to pay off his business debts.

They have a buyer for the house and will exchange once the eviction order has been sorted but it won't complete for a month or two (don't ask, just a blood sucking property developer), so my question:

Assuming that the dissolving of the company will alert the VAT man (it wont - he will have to deregister the VAT number online or VAT Assessments will continue to be issued) Once the Co deregisters for VAT, it will still need to complete a final VAT Return. that he will not be getting his money (there are no assets in the firm). I don't think my friend has been knowingly fraudulent, but obviously negligently running an insolvent company for 2 years, can the VAT man freeze his personal assets and prevent the house sale? Once he has exchanged, can his assets be frozen? - No the VAT debt belongs to the Company NOT to him as a personal debt, when the Co is dissolved on Co House then HMRC will have to decide what they are going to do with the debt on file.

My friend is an alcoholic and a waste of space but I am worried for his partner and their kids. She thinks that the exchange and the deposit will solve all her problems, but I'm worried that the debts of his limited company, although limited, still might stop the house sale and bring their world tumbling down.

Does anyone know how these things work and what the risks are?

Hope this helps and post back again if you need more help.

antrobus

Once the company is struck off by CH it ceases to exist. HMRC may well object to the striking off order if the company owes them money. HMRC will consider the prospects of recovery. If the company has ceased trading and has no assets, they will likely just write it off.

http://www.hmrc.gov.uk/manuals/insmanual/ins5104.htm

Directors of limited companies are not personally liable for company debts. Only where there has been a civil penalty imposed for the fraudulent evasion of VAT would a director have personal liability.

http://www.hmrc.gov.uk/manuals/dmbmanual/dmbm530170.htm

If the friend "has not paid his own tax or NI and defaulted on personal loans etc", then signing over the proceeds of the house sale to his partner will not necessarily protect those proceeds from his personal creditors. An Official Receiver (for example) would likely go after that money and get it.

tedders007

Ok. Thanks for the reply.

I suppose my concern is that when: HMRC will have to decide what they are going to do with the debt on file. they will discover he has been trading insolvently and charging VAT when he knows he can not pay it, and it could be argued that he never intended to pay it. So i'm worried they will take action against him personally as the director of the limited company. Then doing that they may freeze his assets. Is this a possibility?

tedders007

Thank you. antrobus. I posted the last message before seeing your message. So I can assure my friend's partner that her house and the proceeds from it are safe from his company debts, but not his personal ones?

Thanks again.

Hollygoheavily

In a personal bankruptcy, I think the receiver would consider the paying of the proceeds of the house over tot he partner as a gratuitous alienation - I think they look back five years don't they when it comes to disposal of assets?