Corporation Tax Bill, cannot afford
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akira181
Posts: 505 Forumite
in Cutting tax
I had my own company for around 8 months and decided the self employed route wasn't for me, so after my first and only contract was completed, I stopped trading in September 2017.
My accountant filed my accounts when I had finished up and got me a £600 tax refund that didn't get paid. I called HMRC, they checked all my accounts and said I owed nothing and just an authorisation was missing for the refund. 6 weeks later, I got my refund, closed my business bank account and that was that. Or so I thought.
Last week (10 months after I stopped trading) I got a letter from HMRC saying my Corporation Tax of £3,000 is overdue. This is the first I heard of it as my accountant said the corporation tax would have been taken off my tax rebate and the remainder (£600) would be returned.
3 grand out of the blue is a major blow to my finances, especially since I'm about to buy my first flat. Is there anything I can do about this or loopholes to reduce the bill somewhat?
My accountant filed my accounts when I had finished up and got me a £600 tax refund that didn't get paid. I called HMRC, they checked all my accounts and said I owed nothing and just an authorisation was missing for the refund. 6 weeks later, I got my refund, closed my business bank account and that was that. Or so I thought.
Last week (10 months after I stopped trading) I got a letter from HMRC saying my Corporation Tax of £3,000 is overdue. This is the first I heard of it as my accountant said the corporation tax would have been taken off my tax rebate and the remainder (£600) would be returned.
3 grand out of the blue is a major blow to my finances, especially since I'm about to buy my first flat. Is there anything I can do about this or loopholes to reduce the bill somewhat?
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Comments
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First you need to find out the facts of what is happening. Is the £3k demand correct? Best place would be to ask your accountant about it. HMRC make mistakes so you can't just assume it's right. Without knowing whether it's right or wrong, or how it's happened, no-one can give you any meaningful advice. Was the £600 income tax, VAT, NIC or some other tax and was it personal or company?0
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Unfortunately I no longer have any contact with my accountant anymore. We only ever dealt with each other over the phone or email and I don't think he was very good. I had to tell him things multiple times before he'd actually do it.
The £600 refund was from CIS deductions. I will find out where this tax bill is coming from, especially since HMRC told me my accounts had nothing outstanding prior to issuing the rebate.
I've spoken to some of my old colleagues doing the self employed route and a few of them have told me to either dissolve the company or just ignore it and have companies house strike your company off for not filling accounts as once the company is gone, you can't pay it back even if you wanted too. Allegedly one of their accountants said that HMRC are unlikely to chase a one man band for a few grand as you could just shut-up shop and be trading under a new name months later.
Now that doesn't sound very legit and not something I'd want to do as it may affect my chances of getting a mortgage, but if I dispute the bill or cannot come into agreement with HMRC, are my dodgy colleagues "advice" plausible?0 -
I had something similar, for £10k, about 15 years ago - it turned out the accountant had made a mistake and not ticked a box ... and so the quick result was that I owed £0 (as expected) ... and the nightmare all went away. I still have restless thoughts of it though....
I resolved it by "phoning my accountants in a panic and nearly crying down the phone", putting the ball back in their court to come back to me with answers - that route might work for you...0 -
PasturesNew wrote: »I had something similar, for £10k, about 15 years ago - it turned out the accountant had made a mistake and not ticked a box ... and so the quick result was that I owed £0 (as expected) ... and the nightmare all went away. I still have restless thoughts of it though....
I resolved it by "phoning my accountants in a panic and nearly crying down the phone", putting the ball back in their court to come back to me with answers - that route might work for you...
Unfortunately my accountant dealt with his mistakes by getting !!!!ed off and putting the blame on me. I told him in email multiple times that I paid CIS, sent him weekly copies of my payslips that had clearly stated CIS deductions, and monthly CIS deduction summaries. Come the end of the 8 months and time to file accounts, he complained that I never told him about the deductions, it was new to him and he'd have to rework everything and he was going to bill me for it.
After I said I wasn't paying anything more and forwarded all the previous emails with the CIS information highlighted, he sent me my accounts to review (of which the expenses and mileage claims I had to correct cause he got that wrong too) and then filed it with the powers that be. Never heard a thing from him after that.0 -
You must have whatever the final filing was though (ie he must have provided you with a copy)? Have you confirmed what figures were submitted?
Were you paid under PAYE, dividends or some combination from the company? if not, where did your money that you lived on over the 8 months come from?
What records (of the company) do you have from this time?0 -
HMRC can (and will object) to a Company being struck off Companies House when there are tax debts outstanding.Unfortunately I no longer have any contact with my accountant anymore. We only ever dealt with each other over the phone or email and I don't think he was very good. I had to tell him things multiple times before he'd actually do it.
The £600 refund was from CIS deductions. I will find out where this tax bill is coming from, especially since HMRC told me my accounts had nothing outstanding prior to issuing the rebate.
I've spoken to some of my old colleagues doing the self employed route and a few of them have told me to either dissolve the company or just ignore it and have companies house strike your company off for not filling accounts as once the company is gone, you can't pay it back even if you wanted too. Allegedly one of their accountants said that HMRC are unlikely to chase a one man band for a few grand as you could just shut-up shop and be trading under a new name months later.
Now that doesn't sound very legit and not something I'd want to do as it may affect my chances of getting a mortgage, but if I dispute the bill or cannot come into agreement with HMRC, are my dodgy colleagues "advice" plausible?0 -
so what is the current status of the company? It has not been closed (struck off or formally liquidated) so it still lives and has ongoing reporting obligations even if not trading.I had my own company for around 8 months and decided the self employed route wasn't for me, so after my first and only contract was completed, I stopped trading in September 2017.
without an accountant have you taken steps to register the company as dormant with Companies House?
will you submit dormant accounts by the required deadline and thus avoid the automatic Companies house fine for non submission?
seems like you have not really understood the full implications of your actions?0 -
What was your turnover during the 8m of trading, and what were your allowable business expenses? How much tax did you initially pay? It shouldn't be difficult to do a rough assessment of the correct amount of tax payable.
Did those 8m possibly cover 2 tax years?No free lunch, and no free laptop
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I did my husband's filings for the years that he had an active company - each year we had to make corporation tax filings, it is something that you cannot avoid and you are sent a notification every year as a reminder. This is something that you must have, even if you didn't submit it, then your accountant must have done it on your behalf and surely you have a copy of it?
In order to be told that you owe xxx amount in corporation tax then a Company Tax Return must have been filed at some point, and they're generally filed 12 months after the end of your accounting period. It's not an amount that is plucked out of thin air, it's based on your profits and expenses and it's a tax levied at 19%. You have to file a company tax return even if you have no corporation tax to pay:
https://www.gov.uk/company-tax-returns
Is your company still trading? Have you struck it off or listed it at dormant? If you haven't listed it as dormant or struck it off, it's still considered to be a live trading company. If you haven't, you still need to be filing company tax returns for it every year and even possibly PAYE returns for yourself if you're still listed as a director of it.
First of all, you need to clarify where the demand for corporation tax has come from, you need to look through the returns that your accountant did because the company tax return will be a long balance sheet with the amount owed at the end. Unfortunately I don't have any of my old ones on this computer to show you as an example but you can probably google for some images as a guide. If you genuinely get nowhere, then you need to contact HMRC for clarification. I've had some problems with HMRC, serious problems with them that have gone on for 19 months, but their corporation tax side of things was never an issue.
Whoever said above that you can't close a company if there's tax outsitanding is correct, you need to sort this out first. It's not worth getting into a war with HMRC, it'll go on forever and the stress isn't worth it. Sort it out sensibly.0
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