Need advice on a LTD company tax debt and what to do next

premiumz

Hi,

(Not to mods: I posted something similar to this back in January, but this time I have a bit more information and would like to keep this as my new post.)

I’m hoping someone can help me understand my position before I speak to HMRC again and/or take formal insolvency advice.

I’ll try to keep this as clear as possible.

Years ago I started an online business as a sole trader. After a while I incorporated and traded through a limited company. During that period I was given advice by an accountant/tax adviser about a tax planning arrangement. From memory it involved a trust and transactions where gold was bought and then sold shortly afterwards. At the time it was presented to me as legal tax planning, essentially delaying tax rather than writing it off.

HMRC later challenged these arrangements. The paperwork I have found refers to the 2019 loan charge rules introduced by Finance (No. 2) Act 2017, so I believe this was a disguised remuneration / loan charge / gold bullion trust type arrangement.

I chose to settle with HMRC rather than fight it, mainly because the stress was unbearable and I just wanted it dealt with. A settlement agreement was entered into in 2019 with a payment plan over a number of years, ending with a large final/balloon payment.

The company has struggled for a long time. Profits dropped, accountancy costs were high, and I eventually went back to trading as a sole trader rather than through the limited company. The business has never really recovered properly, and the pandemic/interest rates/mortgage increases made things worse. I have already spoken to HMRC a few times and they allowed reduced/interest-only type payments for periods, but the position has not improved. I am now at the point where the company simply cannot afford the final payment and the ongoing interest is just making things worse.

My main question is whether this is likely to remain a company debt only, or whether HMRC could pursue me personally if the company cannot pay.

I have now found the settlement paperwork. The agreement says it is made between:

1. The Commissioners for HMRC; and
2. [Limited company name/address], defined as the “Employer”.

The signature section was signed by me “for and on behalf of” the company, as director/authorised signatory. I cannot see anywhere obvious in the agreement saying I personally guarantee the debt, or that I am personally/jointly and severally liable. I cannot see wording such as personal guarantee, indemnity, joint and several liability, or anything that clearly says I personally agree to pay.

However, I did also find a Statement of Personal Assets in my personal name, which I assume may have been provided as part of affordability/payment plan discussions. Also, in the agreement paperwork, under a charge/interest calculation section, my personal name appears next to PAYE/NIC figures and the interest factored into the amount owed.

So I am confused about whether my name appearing in the PAYE/NIC calculation is just because I was the director/employee who received the benefit under the arrangement, with the company settling as the employer, or whether it suggests HMRC could pursue me personally if the company cannot pay.

The company has very little/no real assets. The online business existed before the limited company and I have since gone back to being a sole trader. There is a website, social media accounts, email list, etc., but no significant physical assets. The computer and phone were paid for personally, not by the company.

I have read that a company with HMRC debt probably cannot simply be dissolved because HMRC can object to strike-off. I also understand that liquidation may be the proper route if the company is insolvent, but I am worried about whether the HMRC debt could then come after me personally because of the disguised remuneration / loan charge background.

The questions I’m trying to answer are:

1. If the settlement agreement names only the limited company as “the Employer”, and I signed only “for and on behalf of” the company, does that usually mean the settlement debt is the company’s debt only?
2. Does the Statement of Personal Assets in my name change anything, or is that usually just an affordability document for HMRC?
3. Does my personal name appearing in the PAYE/NIC interest calculation create personal liability, or is that normal in an employer PAYE/NIC disguised remuneration settlement?
4. If the company genuinely cannot pay the remaining HMRC settlement balance, is liquidation likely to end the company debt, or are there realistic routes for HMRC to pursue me personally?
5. Are Personal Liability Notices, joint and several liability notices, Regulation 72/81 PAYE transfer rules, or similar powers something I should be seriously worried about in this situation?

I know I need proper advice from Business Debtline, an insolvency practitioner, and possibly a tax disputes specialist, but I’m trying to understand the likely position and what to ask before I speak to HMRC again.

So far, I have managed to pay back about 2/3 of the bill, leaving 1/3 outstanding.

Any guidance would be greatly appreciated.

MeteredOut

You need to make a clear separation between yourself and the company.

You say you have paid back 2/3 of the bill. Have you done that personally from your own bank account, or has that been done via the company bank account?

Has the company had any income since the arrangement was put in place. Have you extracted any money from the company since the arrangement was put in place (eg, salary, bonus, dividends).

From what I know about Loan Charges, the HMRC arrangement was with the employee, not the employer, but I've never heard of the buyings/selling gold one, so it might be different. But, if the scheme meant you effectively avoided income tax, then I suspect it will also fall on the employee.

premiumz

https://forums.moneysavingexpert.com/discussion/comment/82063775#Comment_82063775

The payments were made from the company account. I paid money into the company account and then the company paid them. I had to do it that way because they said I needed to payback money from me to the company because of money was taken from the company. Little confusing, but yes, the company sent the money.
Shortly after this, I went back to running the company as a sole trader again as I couldn't afford to keep paying the accountant I had every year. So I've been doing this about 7 years since then. Just earning money as a sole trader, paying some into the company account and then paying the HMRC.
Now the business has basically collapsed and brings in nothing. That's where I am at.

Dead_keen

You are likely to get more support / sympathy / practical experience from people if you post on this forum: https://forums.contractoruk.com/hmrc-scheme-enquiries/

My next suggestion would be to ask these questions of whoever negotiated your settlement with HMRC. But it sounds like you may have done that yourself?

In that case, if it were me, I'd talk to a tax dispute resolution person for a free introductory chat and see what they say as the tax debt is what this will be important and they will know what HMRC's practical approach is. Then take it from there.

One thing that you'd also want to understand is whether there are any other personal liabilities you may have (for example IHT and the tenth anniversary charge, which is topical at the moment - https://caselaw.nationalarchives.gov.uk/ukftt/tc/2026/995). The TDR person would be able to talk to you about that, the risks of that for your particular scheme, and whether what you said / disclosed as part of the settlement creates any issues for you.

Make sure that the tax dispute resolution person is not linked to the promoter of the original scheme in any way.

It's not possible to give a proper answer here without knowing more of the facts.

sheenas

It depends on what state your accounts are in and the in/outs of the HMRC agreement.

The bottom line, if you don't file your accounts they will simply strike off your company effectively freezing all your bank accounts and dissolving your business.

If your companies bank account is empty as suggested, how would your company pay HMRC, It's then down to any personal liability your have, often not a lot.

MeteredOut

https://forums.moneysavingexpert.com/discussion/comment/82063929#Comment_82063929

The Loan Charge process contains a specific piece of legislation that allows HMRC to "look through" the Ltd company, so we can't assume any HMRC strike off would occur as per the normal routes.

https://www.gov.uk/government/publications/disguised-remuneration-transfer-of-liability-technical-note

"The technical note describes how HMRC will transfer the tax liability from the employer to the employee, when HMRC cannot reasonably collect the liability from the employer. It details the process for the transfer in 3 separate scenarios — where the employer no longer exists, is offshore, or cannot pay the liability.

The note also contains the primary and secondary legislation that will be introduced to allow HMRC to transfer the liability from employer to employee."

As stated above, the OP needs expert advice here.

silvercar

https://forums.moneysavingexpert.com/discussion/comment/82063961#Comment_82063961

If that legislation isn’t yet in force it can’t be applied. When it is applied there is the further question of whether it can be applied retrospectively and for how far back.

Dead_keen

If that legislation isn’t yet in force it can’t be applied

The regulations mentioned to do this for PAYE (reg 80 and 81) have been in place for donkey's years. The NIC regulations and legislation mentioned in that doc are not relevant.

Regulation 81 is the one that allows the PAYE liability to be transferred to the employee. But this is all pie in the sky without knowing the full facts. So talk to someone who knows about the tax side.

sheenas

https://forums.moneysavingexpert.com/discussion/comment/82063961#Comment_82063961

I didn't mean HMRC, it would be companies house who strike off the company. As I said the issue the OP will have is the disguised remuneration rules issue.

MeteredOut

https://forums.moneysavingexpert.com/discussion/comment/82064514#Comment_82064514

The legislation is in place. And there is an element of retrospection in the Loan Charge legislation (although HMRC argued otherwise), which upset many people. You can find multiple threads about it on the ContractorUK board linked by someone else above.

MeteredOut

https://forums.moneysavingexpert.com/discussion/comment/82064590#Comment_82064590

HMRC would block the strike off application.