Can the HRMC force the sale of a foreign house which is jointly owned

My husband owes an amount in directors loans and he has no way of paying it back and the only way he sees of moving forward is by going bankrupt.  We do not have any assets in the UK but we currently own a house outright in France which was bought from the proceeds from the sale of my own house which my husband was not on the deeds for and a loan from his mother.  So my question is, could the HRMC come after him & force us to sale the french house which is unfortunately in joint names to recover some of the debt?

Comments

  • RWool said:
    My husband owes an amount in directors loans and he has no way of paying it back and the only way he sees of moving forward is by going bankrupt.  We do not have any assets in the UK but we currently own a house outright in France which was bought from the proceeds from the sale of my own house which my husband was not on the deeds for and a loan from his mother.  So my question is, could the HRMC come after him & force us to sale the french house which is unfortunately in joint names to recover some of the debt?
    As you mention HMRC, does the company owe money to HMRC? Is the company currently going through the liquidation process, have HMRC issued a winding up order?

    In theory the company owes debs separately to the individual, if it cannot pay it's debts and is liquidated then the any funds owed, including the director's loans need to be recovered to pay as much as possible back of what is owed. If your husband is going to go bankrupt he will have to declare all assets and the courts (not HMRC) will decide what happens, but I would say that it would be unlikely that property would be ignored, though how enforceable against a property in France that is is an entirely different matter. 

    What did he do with the money he took out and is it within the range of him being able to repay it over several years? Does he have any other assets? Also based on that situation did he trade whilst insolvent?
  • theoretica
    theoretica Posts: 12,294 Forumite
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    How is the loan from his mother documented?  Is it secured against the house? 
    But a banker, engaged at enormous expense,
    Had the whole of their cash in his care.
    Lewis Carroll
  • Instead of paying himself a proper wage he would take a dividend.  He did tell his accountant that it should be changed so that he increased his wage, which the accountant  didn't do. Its a limited company.  The VAT woman said she was going to recommend winding up the company even though my husband was trying to offer to agree a payment plan with her.  Still waiting for her to respond.  Her original conversation was if you can't pay back £9k each month then im recommending winding the company up.  She wasn't very amenable. 
  • DullGreyGuy
    DullGreyGuy Posts: 10,309 Forumite
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    RWool said:
    Instead of paying himself a proper wage he would take a dividend.  He did tell his accountant that it should be changed so that he increased his wage, which the accountant  didn't do. Its a limited company.  The VAT woman said she was going to recommend winding up the company even though my husband was trying to offer to agree a payment plan with her.  Still waiting for her to respond.  Her original conversation was if you can't pay back £9k each month then im recommending winding the company up.  She wasn't very amenable. 
    Directors taking dividend rather than a higher salary is the norm for small businesses

    Dividends are not director's loans and so still confusing as to what loans have to do with HMRC
  • silvercar
    silvercar Posts: 46,945 Ambassador
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    Two separate legal entities - your husband and the limited company. Limited company means just that - it's liabilities are limited.

    If the company is wound up, the only liability that your husband has will be for personal guarantees he has made for the company's loans. Any other money owed by the company disappears with it.

    He needs professional advice now, before it is wound up, as to what he is entitled to from the company. It may be that he is owed dividends or salary that he should get out before it is wound up. But a lot depends on whether the company is solvent, hence me saying he needs professional advice.
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  • DullGreyGuy
    DullGreyGuy Posts: 10,309 Forumite
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    silvercar said:
    Limited company means just that - it's liabilities are limited.
    No, it means the shareholder's liabilities are limited... the company itself has unlimited liabilities
  • silvercar said:
    Two separate legal entities - your husband and the limited company. Limited company means just that - it's liabilities are limited.

    If the company is wound up, the only liability that your husband has will be for personal guarantees he has made for the company's loans. Any other money owed by the company disappears with it.

    He needs professional advice now, before it is wound up, as to what he is entitled to from the company. It may be that he is owed dividends or salary that he should get out before it is wound up. But a lot depends on whether the company is solvent, hence me saying he needs professional advice.
    The problem with that is that he has a director's loan, he owes the company money, he cannot just choose not to pay the back and so not pay the company's creditors, they can come after him for that amount. They can also come after him for more if he was trading insolvently. 
    RWool said:
    Her original conversation was if you can't pay back £9k each month then im recommending winding the company up.  She wasn't very amenable. 
    I suspect the amounts are not small as the OP has subsequently mentioned monthly payments of £9k to pay the overdue VAT.
    RWool said:
    Instead of paying himself a proper wage he would take a dividend.  He did tell his accountant that it should be changed so that he increased his wage, which the accountant  didn't do. Its a limited company. 
    It is fairly standard to have a small PAYE salary and a director's loan which is converted into dividend, but to convert it to dividend that can only be done from reserves (previous profit) and the company must be solvent (eg able to pay all it's debts).
    RWool said:
    The VAT woman said she was going to recommend winding up the company even though my husband was trying to offer to agree a payment plan with her.  Still waiting for her to respond.  Her original conversation was if you can't pay back £9k each month then im recommending winding the company up.  She wasn't very amenable. 
    I suspect the debt is large and they are not being "amenable" because they see it as someone not playing ball. 

    I do agree with Silvercar on one point, he urgently needs to seek professional advice, likely from an insolvency professional, his liabilities from this have the potential to extend well beyond his director's loan. 
  • Minkym00
    Minkym00 Posts: 770 Forumite
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    There’s not just the directors loan to consider. If he has been trading the company whilst insolvent or to detriment if HMRC, for example, he can still be pursued personally.
  • TripleH
    TripleH Posts: 3,018 Forumite
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    edited 1 February 2023 at 5:29PM
    You might be better asking on the bankruptcy board about whether HMRC can come after the French home.
    That it is abroad and not owned fully by your husband works in your favour.

    EDIT : ignore first paragraph, had in my head this was the housing board. Sorry !!
    May you find your sister soon Helli.
    Sleep well.
  • Mouse007
    Mouse007 Posts: 1,062 Forumite
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    It sounds like a rather large VAT liability has arisen presumably because the director has drawn more from the company than was available to distribute as a dividend. The company owes HMRC and the director owes the company. The key question is what is the difference between these two amounts?

    You might be better off talking to an Insolvency Practitioner and find out what negotiations might be acceptable re the overdrawn director’s loan account. An Insolvency Practitioner (IP) has to do what is in the best interests of the creditors and that might be better than the Official Receiver going fully guns blazing for your husband,

    You husband needs to take control of the situation (see an IP) and not let HMRC take charge.

    I have a case at the moment where the director has overdrawn by £17,500 and HMRC are demanding £40,000. The IP has indicated he would consider an offer of £10,000 (a lump upfront followed by some monthly installments) because it would cost him more than £7,500 to pursue the full amount through the courts. A bounce back loan of £15,000 would also go. I’d say £10k to clear £50k is a good deal. Ironically the IP’s fees would leave HMRC with next to nothing.

    In the past I have seen an IP accept £60k when the debt was £125k.

    The cost to the IP of forcing a sale of the French property would be quite off putting. If your husband can strike a deal then he may be able to avoid a personal bankruptcy.

    Doing nothing is not an option, that will lead to bigger problems.

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