Ltd Co dissolved still owing Corporation Tax

SteveABZ_2

Hi all,

I worked as a contractor for a few years and had a Ltd Co. I ran it well until the last year when my contract ended unexpectedly and I had to use the money set aside for corporation tax to live on.

As the tax bill became overdue, I agreed a repayment plan with HMRC to clear the debt.

Prior to this, on my accountant's advice, I submitted a form DS01 to Companies House, to have the company dissolved. I fully expected HMRC to object (note - I did not inform them that I had submitted a DS01).

I received a letter from Companies House yesterday to confirm that the company is now dissolved.

My question is - if there is no company in existence, what happens regarding the outstanding Corporation Tax. I had only paid £350 out of the £4k due prior to the company being dissolved.

Can I be pursued as an ex-director for payment of the debt? I am now aware that I should have informed HMRC of my intention to dissolve the company.

sangie595

SteveABZ wrote: »

Hi all,

I worked as a contractor for a few years and had a Ltd Co. I ran it well until the last year when my contract ended unexpectedly and I had to use the money set aside for corporation tax to live on.

As the tax bill became overdue, I agreed a repayment plan with HMRC to clear the debt.

Prior to this, on my accountant's advice, I submitted a form DS01 to Companies House, to have the company dissolved. I fully expected HMRC to object (note - I did not inform them that I had submitted a DS01).

I received a letter from Companies House yesterday to confirm that the company is now dissolved.

My question is - if there is no company in existence, what happens regarding the outstanding Corporation Tax. I had only paid £350 out of the £4k due prior to the company being dissolved.

Can I be pursued as an ex-director for payment of the debt? I am now aware that I should have informed HMRC of my intention to dissolve the company.

Can they pursue it? Yes. You knowingly continued to trade after a pint when you knew the company was insolvent. That is a criminal offence. Will HMRC do anything about that - maybe, or maybe not. What is certain is that what you did invalidated the legal status of the company, making you liable.

DandelionPatrol

sangie595 wrote: »

Can they pursue it? Yes. You knowingly continued to trade after a pint when you knew the company was insolvent. That is a criminal offence. Will HMRC do anything about that - maybe, or maybe not. What is certain is that what you did invalidated the legal status of the company, making you liable.

Spell it out for me please. What tells you that his company continued to trade after he knew it was insolvent? What did I miss?

System

HMRC will want their money.

Did you as a person or you acting as director of your company agree to a payment plan? It sounds like it was a personal agreement.. If the former then it is a personal debt that you now owe to the HMRC and they will continue chasing you

martinsurrey

DandelionPatrol wrote: »

Spell it out for me please. What tells you that his company continued to trade after he knew it was insolvent? What did I miss?

SteveABZ wrote: »

and I had to use the money set aside for corporation tax to live on

So he used company cash to live on, probably by repaying directors loans or paying a salary to himself.

at best that's wrongful trading as he has paid one creditor to the detriment of another.

at worst its fraudulent trading as he carried on the trade (paying salaries) knowing the company was insolvent.

http://www.accountingweb.co.uk/article/directors%E2%80%99-duties-companies-difficulty/526675

sangie595

DandelionPatrol wrote: »

Spell it out for me please. What tells you that his company continued to trade after he knew it was insolvent? What did I miss?

It's really quite easy. He spent money due to HMRC on living because the company had no income. So he knew that he had debts that he could not pay. He filed for dissolution of the company. AFTER he did that he agreed a repayment plan with HMRC for the money that the company owed them. He knew the company could not pay. He knew he had filed for the company to be dissolved. And he did not tell HMRC that fact even though he knew that the company owed them the money. That is a deliberate act. A deliberate act of fraud or negligence invalidates company protections. Limited liability does not cover the deliberate actions of a director which they know to be wrong. So that makes the individual liable for the actions of the company.

persa

I would be very surprised if your accountant told you to dissolve the company before arranging for all debtors to be collected and all creditors to be paid. It would be negligent otherwise.

If the company owes HMRC money, then they can have the company reinstated at Companies House. This will be very expensive for you.

From practical experience however, HMRC tend to be very reluctant to get involved with dissolved companies, even where the law is entirely on their side. You may get lucky.

DandelionPatrol

sangie595 wrote: »

It's really quite easy. He spent money due to HMRC on living because the company had no income. So he knew that he had debts that he could not pay. He filed for dissolution of the company. AFTER he did that he agreed a repayment plan with HMRC for the money that the company owed them. He knew the company could not pay. He knew he had filed for the company to be dissolved. And he did not tell HMRC that fact even though he knew that the company owed them the money. That is a deliberate act. A deliberate act of fraud or negligence invalidates company protections. Limited liability does not cover the deliberate actions of a director which they know to be wrong. So that makes the individual liable for the actions of the company.

He seems to have done some bad things, but I don't see any of it as trading.

martinsurrey

DandelionPatrol wrote: »

He seems to have done some bad things, but I don't see any of it as trading.

Trading includes anything to do with the assets or liabilities of the company.

So settling a creditor with company cash, or paying a wage, is trading.

SteveABZ_2

Thanks for the responses. This was my first Ltd Co and simply a vehicle for getting paid for contract work. I am aware of my shortcomings as sole Director and there was never any intention to avoid paying the tax due. HMRC are the only creditor. What I will do now is contact HMRC and explain the situation, as I do honestly intend to honour the debt (I personally spent HMRC's money, after all).

Where I am now concerned is that due to the company being dissolved, and the repayment agreement being between the company and HMRC, the repayment plan is now invalid. Can it be kept going if the company is dissolved.

My accountant did tell me to make sure that the company had no debt prior to submitting form DS01. Needless to say they are surprised that I did not follow correct procedure and that HMRC did not object to the winding up (I assumed, wrongly, that they would monitor the Gazette etc and object as matter of course).

Obviously ignorance is no excuse in the eyes of the law, so I am going to have to hope that the people I deal with re this understand that I want to repay the debt, and am not running away from it.

DandelionPatrol

SteveABZ wrote: »

Where I am now concerned is that due to the company being dissolved, and the repayment agreement being between the company and HMRC, the repayment plan is now invalid. Can it be kept going if the company is dissolved.

Are you able to meet the payment plan? I suggest that if you do, this would be showing good faith on your part - and if HMRC don't accept it, this would be bad faith on their part.

But don't miss any payments on the plan.