Husbands massive debt

Grumpy_chap

A £300k debt is certainly at the level that can be described as "massive" as, at the level of an individual, that is a substantial sum. 

It does seem as though all the debt is to HMRC, which is unusual as @Minkym00 said.

However, debts to HMRC can only accrue when there has been income as taxation, whether VAT, corporation tax, or taxes related to staff & Director salaries is only ever a proportion of turnover and profits.  So, are there, or have there been equally "massive" levels of cash generation somewhere along the way that can be traced and produce realisable assets that allow the debts to be cleared? 

OR, has there been a lifestyle of extravagant consumption that is not aligned with the business size and type?  Have there been payments to the Director (salary, dividend, loans) that have used funds that should have been ear-marked for meeting taxation liabilities?  If so, it is likely the HMRC will pursue the Director personally through the veil of the Ltd Co.

Either way, the OP requires urgent professional advice and needs to be aware of the "wrongful trading" rules.

EDIT: 
I apologise if the above comes across as harsh, negative, or judgmental.  I did not mean it to.  This £300k debt really needs to be set in the context of how it arose and how large the debt is in relation to the normal turnover / profit of the business.

It is entirely possible that the OP is running a viable business that has been impacted by COVID, so reduced turnover meaning a loss (no corporation tax) but the underlying business satisfactory excluding COVID.  If so, assume the OP has applied for grants towards salary costs and any business grants also. 

A sensible business in that type of situation would have taken advantage of deferred payment for HMRC liabilties such as VAT.  It is possible that all of that £300k liability is VAT accrued over 12 months.  So, turnover £1.5m (+VAT).  If that is the case, and normal turnover is higher so that the business operates profitably, then the OP can very likely trade their way out of this and, hence, agree a suitable payment period with HMRC.

There may be no need to really panic.

Unfortunately, the OP has not said what type of business it is, nor the size / turnover / profit that is normally generated.  All this is key to assessing whether the £300k debt is truly "massive" in the proper context.

£300k debt for Bill Gates is a drop-in-the-ocean.  £300k debt for Grumpy_chap is a bigger worry.  No information where on that scale a £300k debt truly is for the OP.

Mariew89

Thanks everyone, I really appreciate you taking the time to post. None of your comments are coming across harsh, only helpful. I’m a different type of person than my husband is, in that I know these things need dealing with as soon as they arise, but hey ho, we are all different and I do feel incredibly sorry for him.  I just wish he would’ve involved me sooner, like he should’ve done.

There has been no dodgy stuff going on, it’s basically a spell of bad luck, mainly due to covid situation.  If he can make a deal with HMRC and get some time, then chances are he can pick it all back up, but who knows what the future holds.  He is in internet sales and marketing, so has no big assists as such, and on top of covid, there has been a google algorithm that saw him lose rank. This is quite normal with google, it’s happened a few times, but with work and time, he’s pulled it back.  Also, the way in which he earns, is quite sporadic, so one month he could earn 20k and the next zero, or even negative.  This makes budgeting difficult and unbeknown to me, the money which should’ve been earmarked for tax, has been dwindling away, paying wages and freelancers, as there hasn’t been any income.

I really do hope they give him a chance, otherwise our lives are about to drastically change, we do have equity in our house, but I always thought that a limited company meant they didn’t repossess homes, especially if in joint names.

As soon as I know what’s happening, I’ll update, but he’s still waiting for the phone call from HMRC, they were due to call Friday afternoon, but didn’t, so I suspect they’ll call today.

With regard to solicitors, if we do need one, would we need separate, or joint ones? Also, there’s the obvious issue of cost too, I’m guessing they wont be cheap 🤦🏻‍♀️

JCS1

Is the business a limited company, sole trader or partnership?

Mariew89

It’s a limited company

Mariew89

The tax didn’t phone again.  He’s had a good chat with the business debt charity and is contacting his accountants to go over everything, so the wheels are at least in motion now.  He’s going to phone the tax after he’s spoken to the accountant, unless they phone beforehand.

Mariew89

He’s been given three weeks by HMRC to sort out a payment plan.  He’s going to offer his credit cards a £1 a month, but it looks like we’re going to lose our car, as the lease is up and it’s in arrears.

pjcox2005

It won't impact VAT or PAYE but if any debt is for corporation tax then is there scope to make a loss carry back claim (presuming losses in CY due to Covid) to offset a proportion.
HMRC were better at time to pay arrangements recently but VAT tends to be the sticking point as technically you're just collecting it on their behalf so shouldn't spend the money.
The limited company protection depends on whether there are any personal guarantees e.g. to banks on debt borrowed. If no personal guarantees it should offer quite a lot of protection but would have consequences for future trading and directorships.

Minkym00

Mariew89 said:

He’s been given three weeks by HMRC to sort out a payment plan.  He’s going to offer his credit cards a £1 a month, but it looks like we’re going to lose our car, as the lease is up and it’s in arrears.

A few things to consider here. HMRC do not normally agree a payment plan longer than 12 months - is that going to be viable? Is the company going to be viable going forward with this liability to repay? You mention that it has been impacted by COVID, can he honestly see things getting better as we are not going to be fully out of lockdown for a few months yet? He needs to be realistic and consider whether it’s time for voluntary liquidation. The company is already insolvent, continuing could very well attract an allegation of insolvent trading, which will mean that the director is personally pursued and THEN your house is at risk. Voluntary liquidation now could be the least worst option.

Have you spoken to Business Debtline yet?

maxmycardagain

Directors can be unaffected by the debts of a ltd company, as were the ones who sent me under, id guess the company owes many suppliers lots of money besides owing HMRC....

Mariew89

maxmycardagain said:

Directors can be unaffected by the debts of a ltd company, as were the ones who sent me under, id guess the company owes many suppliers lots of money besides owing HMRC....

No, there are no suppliers.  It’s not that type of business, so just the debts mentioned.