Struggling to pay back a LTD company tax bill

premiumz

Hi,

I've been struggling to pay back huge debts over the years but it's got to the point I can no longer pay them as they currently stand.

I'll try to cut a long story short.
Started an online business as a sole trader.
After x amount of years, turned that business into a limited company.
Received bad advice from an accountant about a way to save on tax.
Entered a tax avoidance scheme where I delay paying the tax owed (not write it off). All perfectly legal at the time.
HMRC changed the rules around this particular scheme the following year or 2 (can't remember when) and the tax accountant who set it up, liquidated his business and was unreachable.
The HMRC then go and send letters to companies that have used the scheme in the past before they changed the rules and basically say you can settle or fight it in court.
I chose to settle as it was causing me an enormous amount of stress and I just wanted it out of my life.
Agreed to pay it back over x amount of years.
about a year later I chose to go back to being a sole trader instead of a limited company because my accountancy bills were getting out of hand and profits weren't as good as they were previously. I had to cut costs somehow.
I finally got to the end of the payment plan and there is a bumper payment left. I was planning on remortgaging the house and using some money to pay this offer when I initially agreed to the plan.
But the company has not been doing well for a while, I've been doing all I can to try and pay this debt but it's been a struggle. The pandemic also happened which increased a lot of things. One being our mortgage repayments etc I had to remortgage twice during this to help pay the payments each month which meant our mortgage bill went up.
I then called the HMRC and agreed to pay pretty much interest only payments for 6 months and then re-evaluate our position as I told them I could not afford the bumper payment at the time but hope that something may turn around during those 6 months.
I have now delayed it 3 times (1.5 years)
I've got to call them again soon but in all honesty things just haven't picked up to a point where I can pay it and I'm just throwing money away I don't have on the interest.
Sinking deeper into debt and hardly any money coming in.
I was making ends meat but now I'm struggling to do that and the job market has been nothing short of diabolical. Basically hear nothing back from anyone and I've been trying for a long time to get something to help out as an extra.

I've looked up if there's much I can do about it as it's a limited company debt.
Some say I might be able to dissolve the company and ask the debt to be stricken off? Seems unlikely the HMRC would allow that from what I have read.
Would they come after me personally even if the business did dissolve or liquidate?

The only assets I have related to the company is a computer and phone which I paid for personally, not the LTD company. I also have a website, social medias, email list etc. Just online business stuff.
Would they take those? I had those before it was a LTD company. I've been a sole trader again now for about 3 years.

Any help would be greatly appreciated. I'm not after any sympathy but I've been trying really hard to get this sorted and it's been so tough, I can't even begin to explain!

eskbanker

Directors are only responsible for company debts in certain circumstances, e.g. misconduct, personal guarantees, etc, so drawing a line by folding the company may be viable, but best take some qualified advice on that!

https://www.gov.uk/guidance/director-information-hub-debts-and-insolvent-companies

Dead_keen

HMRC can transfer a company's tax debts to directors in certain circumstances.  More details here: https://www.rossmartin.co.uk/penalties/6359-personal-liability-notices

I'd suggest you talk to someone who is a tax professional who can understand what you have agreed with HMRC and what the implications of liquidating the company are based on your own circumstances.  Make sure that they are not linked to the promoters of your avoidance scheme.  You could have a look / ask here for recommendations: https://forums.contractoruk.com/hmrc-scheme-enquiries/ 

premiumz

Anyone here offer any advice on the above? I went to my accountant but sadly they basically turned me away and told me to seek someone who specializes in this sort of thing. I don't have much, so can't hire a top of the line insolvency firm to have this conversation to begin with if it's a no go. I don't want to spiral into anymore debt.

JibberdyDacodo

Try posting on https://www.ukbusinessforums.co.uk/forums/legal-employment-and-insolvency.57/

They have some decent IP's over there who would be willing to explore the options.

Dead_keen

premiumz said:

Anyone here offer any advice on the above? I went to my accountant but sadly they basically turned me away and told me to seek someone who specializes in this sort of thing. I don't have much, so can't hire a top of the line insolvency firm to have this conversation to begin with if it's a no go. I don't want to spiral into anymore debt.

Give a tax investigation specialist on LinkedIn a call for a chat (search for something like tax dispute resolution).  They will all do a call for free.  There are lots of them but here are some (who are nothing to do with me) to get you started that I would trust from smaller firms: https://www.linkedin.com/in/ben-proctor-6300b698/   https://www.linkedin.com/in/jessica-mclellan-62296722/ https://www.linkedin.com/in/david-francis-gt/ https://www.linkedin.com/in/jon-preshaw-01199825/ https://www.linkedin.com/in/jeremy-johnson-793423a/ 

Grumpy_chap

eskbanker said:

Directors are only responsible for company debts in certain circumstances, e.g. misconduct, personal guarantees, etc, 

Maybe like this:

premiumz said:

turned that business into a limited company.
Received bad advice from an accountant about a way to save on tax.
Entered a tax avoidance scheme 

Following the link provided, and then the "associated with wrongdoing" link the fact the OP was involved with a tax avoidance scheme would very likely mean that the OP will be held personally liable by HMRC:

"HMRC taxes such as VAT and Corporation Tax are generally limited company debts. But directors may be held personally liable if HM & Revenue discover evidence of a ‘deliberate’ avoidance of paying. Where HMRC establishes that errors are ‘deliberate’ or ‘deliberate and concealed’ it can render the associated parties 100% liable, on a personal basis."

Ltd Co. only really has three types of taxes that can become overdue to HMRC in normal processes.
 - VAT, paid by the customer and only collected by the Ltd Co to pass on to HMRC in short timeline
 - Payroll related taxes, to be paid to HMRC each pay period
 - Corporation Tax which only arises on the basis of Ltd Co making profits

We the tax avoidance scheme the OP became involved with the "disappearing loan" whereby an external Fake Ltd Co is created to invoice the real Ltd Co for some services conveniently equal to whatever income the real Ltd Co has generated.  That means there is a zero profit by the real Ltd Co.  The external Fake Ltd Co then "loans" the Director the money the real Ltd Co. has paid (less a fee of around 15% which is retained by external Fake Ltd Co).  When the heat turns up, the external Fake Ltd Co is wound up and disappears (along with the 15% fees) but never calls in the loan paid to the Director of the real Ltd Co. so the Director has all the money and has paid no tax anywhere (but has suffered the fee charged by the Fake Ltd Co.  That explains why the Accountant that gave the poor advice simply wound up the Ltd Co and vanished.

premiumz said:

Hi,

I've been struggling to pay back huge debts over the years but it's got to the point I can no longer pay them as they currently stand.

I'll try to cut a long story short.
Started an online business as a sole trader.
After x amount of years, turned that business into a limited company.
Received bad advice from an accountant about a way to save on tax.
Entered a tax avoidance scheme where I delay paying the tax owed (not write it off). All perfectly legal at the time.
HMRC changed the rules around this particular scheme the following year or 2 (can't remember when) and the tax accountant who set it up, liquidated his business and was unreachable.
The HMRC then go and send letters to companies that have used the scheme in the past before they changed the rules and basically say you can settle or fight it in court.
I chose to settle as it was causing me an enormous amount of stress and I just wanted it out of my life.
Agreed to pay it back over x amount of years.
about a year later I chose to go back to being a sole trader instead of a limited company because my accountancy bills were getting out of hand and profits weren't as good as they were previously. I had to cut costs somehow.
I finally got to the end of the payment plan and there is a bumper payment left. I was planning on remortgaging the house and using some money to pay this offer when I initially agreed to the plan.
But the company has not been doing well for a while, I've been doing all I can to try and pay this debt but it's been a struggle. The pandemic also happened which increased a lot of things. One being our mortgage repayments etc I had to remortgage twice during this to help pay the payments each month which meant our mortgage bill went up.
I then called the HMRC and agreed to pay pretty much interest only payments for 6 months and then re-evaluate our position as I told them I could not afford the bumper payment at the time but hope that something may turn around during those 6 months.
I have now delayed it 3 times (1.5 years)
I've got to call them again soon but in all honesty things just haven't picked up to a point where I can pay it and I'm just throwing money away I don't have on the interest.
Sinking deeper into debt and hardly any money coming in.
I was making ends meat but now I'm struggling to do that and the job market has been nothing short of diabolical. Basically hear nothing back from anyone and I've been trying for a long time to get something to help out as an extra.

I've looked up if there's much I can do about it as it's a limited company debt.
Some say I might be able to dissolve the company and ask the debt to be stricken off? Seems unlikely the HMRC would allow that from what I have read.
Would they come after me personally even if the business did dissolve or liquidate?

The only assets I have related to the company is a computer and phone which I paid for personally, not the LTD company. I also have a website, social medias, email list etc. Just online business stuff.
Would they take those? I had those before it was a LTD company. I've been a sole trader again now for about 3 years.

Any help would be greatly appreciated. I'm not after any sympathy but I've been trying really hard to get this sorted and it's been so tough, I can't even begin to explain!

premiumz

Grumpy_chap said:

eskbanker said:

Directors are only responsible for company debts in certain circumstances, e.g. misconduct, personal guarantees, etc, 

Maybe like this:

premiumz said:

turned that business into a limited company.
Received bad advice from an accountant about a way to save on tax.
Entered a tax avoidance scheme 

Following the link provided, and then the "associated with wrongdoing" link the fact the OP was involved with a tax avoidance scheme would very likely mean that the OP will be held personally liable by HMRC:

"HMRC taxes such as VAT and Corporation Tax are generally limited company debts. But directors may be held personally liable if HM & Revenue discover evidence of a ‘deliberate’ avoidance of paying. Where HMRC establishes that errors are ‘deliberate’ or ‘deliberate and concealed’ it can render the associated parties 100% liable, on a personal basis."

Ltd Co. only really has three types of taxes that can become overdue to HMRC in normal processes.
 - VAT, paid by the customer and only collected by the Ltd Co to pass on to HMRC in short timeline
 - Payroll related taxes, to be paid to HMRC each pay period
 - Corporation Tax which only arises on the basis of Ltd Co making profits

We the tax avoidance scheme the OP became involved with the "disappearing loan" whereby an external Fake Ltd Co is created to invoice the real Ltd Co for some services conveniently equal to whatever income the real Ltd Co has generated.  That means there is a zero profit by the real Ltd Co.  The external Fake Ltd Co then "loans" the Director the money the real Ltd Co. has paid (less a fee of around 15% which is retained by external Fake Ltd Co).  When the heat turns up, the external Fake Ltd Co is wound up and disappears (along with the 15% fees) but never calls in the loan paid to the Director of the real Ltd Co. so the Director has all the money and has paid no tax anywhere (but has suffered the fee charged by the Fake Ltd Co.  That explains why the Accountant that gave the poor advice simply wound up the Ltd Co and vanished.

premiumz said:

Hi,

I've been struggling to pay back huge debts over the years but it's got to the point I can no longer pay them as they currently stand.

I'll try to cut a long story short.
Started an online business as a sole trader.
After x amount of years, turned that business into a limited company.
Received bad advice from an accountant about a way to save on tax.
Entered a tax avoidance scheme where I delay paying the tax owed (not write it off). All perfectly legal at the time.
HMRC changed the rules around this particular scheme the following year or 2 (can't remember when) and the tax accountant who set it up, liquidated his business and was unreachable.
The HMRC then go and send letters to companies that have used the scheme in the past before they changed the rules and basically say you can settle or fight it in court.
I chose to settle as it was causing me an enormous amount of stress and I just wanted it out of my life.
Agreed to pay it back over x amount of years.
about a year later I chose to go back to being a sole trader instead of a limited company because my accountancy bills were getting out of hand and profits weren't as good as they were previously. I had to cut costs somehow.
I finally got to the end of the payment plan and there is a bumper payment left. I was planning on remortgaging the house and using some money to pay this offer when I initially agreed to the plan.
But the company has not been doing well for a while, I've been doing all I can to try and pay this debt but it's been a struggle. The pandemic also happened which increased a lot of things. One being our mortgage repayments etc I had to remortgage twice during this to help pay the payments each month which meant our mortgage bill went up.
I then called the HMRC and agreed to pay pretty much interest only payments for 6 months and then re-evaluate our position as I told them I could not afford the bumper payment at the time but hope that something may turn around during those 6 months.
I have now delayed it 3 times (1.5 years)
I've got to call them again soon but in all honesty things just haven't picked up to a point where I can pay it and I'm just throwing money away I don't have on the interest.
Sinking deeper into debt and hardly any money coming in.
I was making ends meat but now I'm struggling to do that and the job market has been nothing short of diabolical. Basically hear nothing back from anyone and I've been trying for a long time to get something to help out as an extra.

I've looked up if there's much I can do about it as it's a limited company debt.
Some say I might be able to dissolve the company and ask the debt to be stricken off? Seems unlikely the HMRC would allow that from what I have read.
Would they come after me personally even if the business did dissolve or liquidate?

The only assets I have related to the company is a computer and phone which I paid for personally, not the LTD company. I also have a website, social medias, email list etc. Just online business stuff.
Would they take those? I had those before it was a LTD company. I've been a sole trader again now for about 3 years.

Any help would be greatly appreciated. I'm not after any sympathy but I've been trying really hard to get this sorted and it's been so tough, I can't even begin to explain!

So you believe they would most likely go after me personally for the debt because of the avoidance scheme?
That's what I am worried about. I didn't want to go down this rabbit hole if it ends up sending me more into debt and increases the stress I'm already under. It's terrible enough as it is!

The example you gave regarding why the bad tax advisor wound his company up isn't the avoidance scheme he advised. The scheme was to do with setting up a trust and buying gold etc. It meant owing the trust money and it would eventually need to be paid or the debt would get passed down. So it was essentially shifting the bill elsewhere until it was eventually paid. But once settling with the HMRC, the trust gets wound up and then the bill goes back to the HMRC. Something like that.

Grumpy_chap

premiumz said:

So you believe they would most likely go after me personally for the debt because of the avoidance scheme?

I don't know but, following the link posted by Eskbanker upthread and then "when are Director's liable for company dets?" it has a link "associated with wrongdoing" ( https://business-insolvency-helpline.co.uk/directors-personally-liable-business-debts/ ) and the part I quoted was under the heading "are Director's personally liable for VAT in liquidation?" which cites deliberate avoidance of paying.

premiumz said:

The example you gave regarding why the bad tax advisor wound his company up isn't the avoidance scheme he advised. The scheme was to do with setting up a trust and buying gold etc. It meant owing the trust money and it would eventually need to be paid or the debt would get passed down. So it was essentially shifting the bill elsewhere until it was eventually paid. But once settling with the HMRC, the trust gets wound up and then the bill goes back to the HMRC. Something like that.

I am not so sure that the scheme I described and the one you have is substantially different.  Both involve money from the Ltd Co going to some external body and the external body then loans the money to the Director, except your scheme had the buying of gold involved and, notionally, the debt was "envisaged" to be repaid somehow.
What the scheme was is probably academic if the scheme has been determined as tax avoidance which is beyond normal tax planning / mitigation but not always quite into clearly illegal tax evasion.

Dead_keen

premiumz said:

The scheme was to do with setting up a trust and buying gold etc. It meant owing the trust money and it would eventually need to be paid or the debt would get passed down. So it was essentially shifting the bill elsewhere until it was eventually paid. But once settling with the HMRC, the trust gets wound up and then the bill goes back to the HMRC. Something like that.

premiumz said:

I've looked up if there's much I can do about it as it's a limited company debt.

The OP has not given us enough information to go with.  But let's just make things up and guess.  The OP's scheme could have worked in a number of different ways but each was designed to get around the disguised remuneration rules while giving the employer a corporation tax deduction.  In a simple example, the scheme might have worked like this:

1. An EBT was established by the company.  

2. The company promised to pay the EBT £100,000 over the next ten years.

3. The company agreed to fund a purchase of gold (on deferred payment terms) worth (say) £100,000 for the OP.

4. The gold was purchased from a third party for £100,000.

5. The OP didn't polish the gold or put it in a shoe box but instead immediately sold the gold back to the third party for £100,000 (oh, no one sees the gold either - someone just crosses out the owner's name and scribbles a new name on a post-it note in Switzerland a few times before stirring their coffee).

6. The Company’s liability to pay the third party was settled by the OP in return for a credit of £100,000 to the OP's director's loan account.

7. In connection with the purchase of the gold a long-term obligation was created under which the OP was required in the future to pay to the trustee of the EBT about £100,000 (plus something akin to interest).

There are other ways of doing this type of scheme but as I am making up facts, it's a good enough for me.  For those not familiar with dodgy schemes, this is the kind of thing that happened quite regularly. Often because of persuasive salesmen selling dodgy schemes combined with a keeness for directors to keep more money of their hard-earned money in their pocket rather than waste it on funding a pay rise for nurses.  But I have no idea of the OP's motivation. 

Depending on how fed up HMRC was feeling about the abusive scheme I described (abusive here has a tax meaning) then HMRC would have asked for the company to pay the PAYE/NIC/interest on late tax, possibly a penalty and possibly denied a corporation tax deduction for the £100,000.  This type of employee scheme would not have involved the avoidance of VAT.  In reality, the spivy promoters, enablers and referrers would also have got some fees out of it too.  The OP's company would have settled this a while ago with HMRC and the company would have reached a time to pay deal with HMRC.

So we get to the stage where today the company owes HMRC, say, £30,000 for a lot of PAYE and a bit of NIC.  And the million dollar question is can that £30,000 liability be transferred to director?  In the good old days, the answer would have been "no".  Implement the scheme today and the answer is 100% "yes".  So the question is whether the OP did this in the good old days or in the modern world.  I can't answer that as there are not enough facts.  Similarly, I have no idea if what I have made up actually happened.  But let's pretend I know stuff about dodgy schemes and it really did happen like this. 

The keywords to google for this are "joint and several liability notices" (there are also "personal liability notices" but less likely to apply to gold bar / loan schemes).  There are lots of fact-based conditions around JSLNs but one of the main ones is that the insolvent company has engaged in tax avoidance arrangements and there is unpaid PAYE/NIC.  The answer to that, on my made up facts, is clearly "yes".  So that just leaves the question of whether we are in the good old days or the new regime.  The JSLN rules apply to tax liabilities for any period that ends on or after 22 July 2020.   

So the mention of "gold" to me suggests it was in the early to mid-2010s.  Let's say 2015.  If that is the case, the "new" JSLN rules would not apply.   Hooray / Boohoo (* delete as appropriate if you are a failed tax avoider or a concerned citizen about the abuse of the tax system).  On some random made up facts there can be no transfer of liability to the director. 

But someone who knows the tax legislation, knows HMRC's likely attitude, knows what the actual settlement agreement said, knows what the time to pay agreement says, knows how the settlement agreement interacts with the April 2019 loan charge, knows how the OP's conduct has been pre-settlement, knows how the OP's conduct has been post-settlement (e.g. "I chose to go back to being a sole trader instead of a limited company" might suggest bad faith when doing the settlement agreement) will be able to give an answer that is actually relevant to the OP and will be able to help discuss how to proceed with HMRC.  A tax dispute resolution person would also be able to talk sensibly about HMRC's review process for a JSLN and how to appeal one.