selling all shares of private limited IT company

[itcontractor01]

One of my close friend has asked me for advice (this is what he was suggested by a tax advisor), what are the implication or liabilities of old directors if they are selling all shares of private limited company and old directors will resign and statement filed with HMRC.

Can HMRC chase the old directors for any VAT and CT Tax matters? Or will this now be responsibility of new directors? As the new directors have agreed to buy all the shares from the company.

Before anyone raises question - the company run by my friend has been operating since 10 years and they have paid all taxes and liabilities for 8 years and there is no intentions to dodge any hard earned tax payers taxes.

[WordIsBond]

Is he concerned about historical or future claims? He's obviously not on the hook for future claims.

For historical claims, I suppose he could have trouble if he's been intentionally negligent or horribly careless. If everything has been filed that should have been filed in a timely way, and if the taxes have been paid, then any problems are because of honest mistakes, right?

In that case, he should be in pretty good shape. Any liabilities are the company's, and they would only come after him if, firstly, the company couldn't address them and, secondly, they could pierce the corporate veil, which isn't too likely, if he's been reasonably responsible.

If he's trying to escape something and hand off responsibility/liability to the new owners/directors, it probably won't work. If he's just trying to sell a company that has some value and just wants to be assured that any problems that arise are going with it, chances are pretty good that they are.

Does the company have any assets? Revenue stream?

[mudskipper]

Does the company have any assets? Revenue stream?

I don't know if this is the case for OP's friend, but one of the accountant companies was offering to buy customers' companies at 90% of the value so that retained profit would be subject to CGT rather than normal taxation rates. Customers were then able to form a new company whilst avoiding the phoenixing rules as they hadn't closed down their own company. Well outside my comfort envelope.

[Dom at Fox Bartfield]

Sale of Company

One of my close friend has asked me for advice (this is what he was suggested by a tax advisor), what are the implication or liabilities of old directors if they are selling all shares of private limited company and old directors will resign and statement filed with HMRC.

Can HMRC chase the old directors for any VAT and CT Tax matters? Or will this now be responsibility of new directors? As the new directors have agreed to buy all the shares from the company.

Before anyone raises question - the company run by my friend has been operating since 10 years and they have paid all taxes and liabilities for 8 years and there is no intentions to dodge any hard earned tax payers taxes.

Normally the tax liabilities remain with the company, unless the previous directors can be proven to be negligent, however as part of any purchase it's likely that there will be warranties on the sale where anything that the purchasers were not aware of or didn't find out as part of any due diligence prior to acquisition would then clawback from the seller. Of course any warranties could be meaningless if there's nothing to recover.

[MJHolohan]

As directors they won't have any liabilities so long as they act improperly in accordance with companies law.

As per Dom tax liabilities are with the company so HMRC will come after the company to settle any money that is owed. As this may impact the value that the acquiring shareholders have paid for the company they may look to claim against the selling shareholders if they have withheld information etc.. At this point warranties and indemnities provided in the SPA at the time of purchase would become important.

[cojak]

As directors they won't have any liabilities so long as they act improperly in accordance with companies law.

As per Dom tax liabilities are with the company so HMRC will come after the company to settle any money that is owed. As this may impact the value that the acquiring shareholders have paid for the company they may look to claim against the selling shareholders if they have withheld information etc.. At this point warranties and indemnities provided in the SPA at the time of purchase would become important.

Improperly???

[Crossroads]

I vaguely remember that... do you know who was offering it?

I don't know if this is the case for OP's friend, but one of the accountant companies was offering to buy customers' companies at 90% of the value so that retained profit would be subject to CGT rather than normal taxation rates. Customers were then able to form a new company whilst avoiding the phoenixing rules as they hadn't closed down their own company. Well outside my comfort envelope.

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[mudskipper]

I vaguely remember that... do you know who was offering it?

Sent from my ONEPLUS A6003 using Contractor UK Forum mobile app

Yes.

[Crossroads]

Give us a clue?

Yes.

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[mudskipper]

Give us a clue?

Sent from my ONEPLUS A6003 using Contractor UK Forum mobile app

I believe InTouch or one of their sister companies was offering this service to customers with large company reserves a few years back. I'm aware of someone who did this, but I declined it so am not familiar with all the details and don't know whether this is still a "thing".