Crippling debt - but I can sell my business?

Ryemck

Hi guys
I run a website that earns me about £2200 a month. 
However my first tax year I messed up big time and was unable to pay. So I owe tax from last year + this year which is £12,000. (my own fault I know and I deserve this situation)
Using the pay plan calculator I have, I can pay £3000 in January then £700 a month. I have £1300 saved, in Jan I plan to save a further £500 and open a £1200 overdraft to cover the rest.
Last month I received a letter from DWP stating I owe £1225 in overpaid tax credits from 2018 that my partner (at the time) received.
I also owe £290 to funeral directors.
Worked out payment plans with them both for £105 and £29 a month.
Business expenses also cost about £110 a month for a total of £913.
I have my son half the time so have a house/car etc so all bills total is about £2300 a month.
As you can see, I cannot afford this
Down £100 a month with already a £1200 overdraft
Loans tell me I'd pay back £24k on a £13k loan so that's out of the question
But my business is valued at around £100k by website flippers. Could pay off all taxes/debts (would get taxed on the sale) and left with £60k, but no income
Business unaffected by COVID and I'm not my kid's "Main" carer so no help from the government.
What do you think I should do?

greensalad

I wouldn't trust the £100k figure on website flippers. Wait until you actually get a proper sum from someone willing to pay. Just because some automatic thing says your site is worth X doesn't mean anyone is willing to pay X.

Personally I would keep the business, if it's profitable. It seems like it might be quite passive income too? Do you have another job? 

The income per year (£26k) seems pretty good and your debts don't seem completely unmanageable if you can come to an agreement with HMRC. Have you discussed with them a reasonable plan?

Pay off the funeral home first. It's a smallish debt and would be good to get it off your back. 

Ryemck

Having looked at similar site sales they tend to go for around £80k to be fair. But that's still enough to pay everything off  


Yes it's completely passive and costs about £800 a year to run, I'm so thankful to have so much time for my son so I really don't want to give it up

I'll owe HMRC another £6k in 13 months so I doubt they'll help haha wondering if there's any other options I have.

To be fair if I acquired another £2200 by Jan I'd be OK haha

Ryemck

I've figured out a plan, but it needs HMRC agreeing...

21-22
£11,500 owed
Pay £1800 in Jan -> £9700 owed. Pay £500 a month over 11 months -> £4200 owed. 

22-23
New tax year so £6k ontop -> £10,200 owed
Pay saved £1370 in Jan -> £8830 owed. Pay £500 a month over 11 months -> £3330 owed. 

23-24
New tax year so £6k ontop -> £9330 owed
Pay saved £3140 in Jan -> 6190 owed. Pay £500 a month over 11 months -> £690 owed

24-25
New tax year so £6690 owed
Pay saved £3140 in Jan -> £3550 owed. Pay £500 a month for 7 months, then £50 the 8th month -> 0 owed


Can easily save for the full amount come 25-26 then 
Think HMRC would be ok with that?

tacpot12

Selling the website could be a good option in that it would reduce the amount of worry you are currently facing. You seem to have a flair for the business, and you won't make the same mistake with your tax again. You could sell and start a new website in a field that is nothing to do with your previous business.  I expect the sale documents will preclude you running a similar site for 6 months plus.

If you do sell, use a third solicitor who can provide an ESCROW service. Both you and the purchasers should have your own solicitors who are acting for you. (You own solicitor will have a view on whether ESCROW is necessary). 

The idea behind ESCROW is that you agree what you are selling with buyers. They agree with you how much they will pay you. They deliver the money to the solicitor, and you deliver what you are selling, and the means to access it, e.g. passwords/keys/etc. to the solicitor, the solicitor checks everything is correct and then will release the money to you. The solicitor can also check that information you have provided during the Due Diligence process is correct. This protects both of you as you can be sure there are cleared funds available to pay you, and stops them getting access to your business until they have paid.

I do agree that your debts can be managed, so if you are keen on keeping the business and can cope with the worry for 18months or so, keep going!

Well done on getting this far.

Ryemck

EDITED, SEE PREVIOUS POST PLEASE
Sorry - couldn't find the edit button before lol

warby68

If your website provides passive incoime, what is to stop you taking a 2nd job ? Obviously economic conditions are not brilliant but even a few hours at minimum wage will significantly boost your £2300 pm.
I wouldn't be giving up a passive income that generates over £2200 if working a bit more elsewhere could save it.

Ryemck

I have my son a lot and I'm not sure anywhere will work around the schedule
Nethertheless I have applied to some temporary places and waiting to hear back 

brucethefish

How is the business set up? Sole trader/Ltd co?

Ryemck

Sole trader

brucethefish

Ah, might be worth a chat with an accountant about going limited