Advice on Dissolution

**Sally@InTouch** · 15 June 2012, 13:39

Originally posted by Cipher View Post

Hello,

I would be very grateful for any advice on my particular situation.

Before I start, I know that I am a moron and I know I have got myself into this situation. I just want to fix it.

I started trading through a limited company in September 2010. I work in IT and I originally worked as a contractor for a client. I also took up projects through my limited company. My contract with the client finished in August 2011 and since then I haven't had many other projects coming in either. During this period, I managed to find myself a permanent position (considerably less pay than when I was contracting) and I also managed to take out nearly 24000 GBP from my business account as a director loan. Now I am liable for Corporation Tax of 21000 for that period and an additional 6000 as a deposit on my director's loan. As it has come to pass I do not have enough funds to pay the entire Corporation Tax. I can just about pay half of it now though I have two projects which are due in the next 90 days which would cover the other half.

I have approached my bank for a loan but my application was declined as they haven't seen any income coming into my business account over the last 10 months. I have tried applying for a personal loan but that got turned down as well.

Ideally I would like to pay my CT and close my company. I do not owe any other monies to anyone else and my VAT is up to date.

I was in a bad place personally after my contract finished and my then fiancee influenced me to make choices I normally wouldn't have and hence the loan. Thankfully I did see the light eventually and I am no longer with her. I paid back around 8000 GBP of the loan. I can make a payment of 500 GBP every month from my salary towards the repayment of the loan.

What would be the best way for me to close / wind up the company? Like I mentioned I owe HMRC 27000 GBP in total and I can pay about 13000 GBP right now and I can pay the rest within the next 3 months. I do not owe anything else. My VAT is up to date. Can I make an arangement with HMRC to pay the remaining amount in the next 3 months and then close my limited company down? Will I have to first repay the remaining 16000 GBP into the company account?

Thank you in advance for any advice. I am very grateful.

Regards

Alex

Firstly, sorry that you're in this predicament.
My advice would be to call HMRC, explain the situation fully and try and negotiate payment terms with them.

Companies House cannot strike the company off the register until all the company liabilities have been paid with HMRC.

**Safe Collections** · 15 June 2012, 13:44

Originally posted by Sally@InTouch View Post

Firstly, sorry that you're in this predicament.
My advice would be to call HMRC, explain the situation fully and try and negotiate payment terms with them.

Companies House cannot strike the company off the register until all the company liabilities have been paid with HMRC.

As Sally says call HMRC and explain the situation, they are surprisingly reasonable at times

**geoff from contracta IOM** · 15 June 2012, 13:47

Originally posted by Cipher View Post

Hello,

I would be very grateful for any advice on my particular situation.

Before I start, I know that I am a moron and I know I have got myself into this situation. I just want to fix it.

I started trading through a limited company in September 2010. I work in IT and I originally worked as a contractor for a client. I also took up projects through my limited company. My contract with the client finished in August 2011 and since then I haven't had many other projects coming in either. During this period, I managed to find myself a permanent position (considerably less pay than when I was contracting) and I also managed to take out nearly 24000 GBP from my business account as a director loan. Now I am liable for Corporation Tax of 21000 for that period and an additional 6000 as a deposit on my director's loan. As it has come to pass I do not have enough funds to pay the entire Corporation Tax. I can just about pay half of it now though I have two projects which are due in the next 90 days which would cover the other half.

I have approached my bank for a loan but my application was declined as they haven't seen any income coming into my business account over the last 10 months. I have tried applying for a personal loan but that got turned down as well.

Ideally I would like to pay my CT and close my company. I do not owe any other monies to anyone else and my VAT is up to date.

I was in a bad place personally after my contract finished and my then fiancee influenced me to make choices I normally wouldn't have and hence the loan. Thankfully I did see the light eventually and I am no longer with her. I paid back around 8000 GBP of the loan. I can make a payment of 500 GBP every month from my salary towards the repayment of the loan.

What would be the best way for me to close / wind up the company? Like I mentioned I owe HMRC 27000 GBP in total and I can pay about 13000 GBP right now and I can pay the rest within the next 3 months. I do not owe anything else. My VAT is up to date. Can I make an arangement with HMRC to pay the remaining amount in the next 3 months and then close my limited company down? Will I have to first repay the remaining 16000 GBP into the company account?

Thank you in advance for any advice. I am very grateful.

Regards

Alex

Alex I'm going to be brutally honest with you ....you are a numpty ! But it is an easy beginners mistake to make.

This is not an ideal situation as I'm sure you are aware. You are a creditor of the company and as such are liable to repay the directors loan. Repay the directors loan to the extent that you can, the company can make a payment against the CT due to the extent that it can. You will then need to come to an arrangement with HMRC re. the CT and you will need to clear the directors loan before the company can be wound up. Please bear in mind that the current incoming funds to the Ltd. Co. are also like to trigger a CT liability which will need to be settled. Get an accountant quickly to firstly give you a detailed picture of the companies financial position and also to negotiate with HMRC on behalf of the company.
If the company is technically insolvent you should NOT continue to trade with it as you may be held personally liable for company debts arising during this period !

HTH

**northernladuk** · 15 June 2012, 13:48

On teh directors loan thing. 24000 isn't a directors loan per se. Directors loans are up to 5k which must be repaid within 9 months of the LTD's year end if it is to be tax free. Anything after will incur BiK and interest is required to be paid back on the money, plus holding a percentage at the end of the year, I forget, but anyway.... have you taken this in to account, is this what the 6k deposit you speak of?

Do you have an accountant do your final figures for you or are you potentially missing some important points here?

**Safe Collections** · 15 June 2012, 14:22

Originally posted by geoff from contracta IOM View Post

If the company is technically insolvent you should NOT continue to trade with it as you may be held personally liable for company debts arising during this period !

If ultimately the books balance and HMRC are paid off being held personally liable is highly unlikely.

But as Northernlad and Geoff have said speaking to an accountant would probably be a good idea, if only to ensure you haven't missed anything vital and to put your mind at ease

**Wanderer** · 15 June 2012, 20:36

Originally posted by northernladuk View Post

On teh directors loan thing. 24000 isn't a directors loan per se. Directors loans are up to 5k which must be repaid within 9 months of the LTD's year end if it is to be tax free. Anything after will incur BiK and interest is required to be paid back on the money, plus holding a percentage at the end of the year, I forget, but anyway.... have you taken this in to account, is this what the 6k deposit you speak of?

Directors loans can be any amount, the 24k is still accounted for as a directors loan, it's just that he will have to pay it back with interest (or suffer BIK tax) because it was over £5k.

The 6k deposit is the S455 tax charge on the loan which is refundable the year after the loan is cleared.

I guess this is why people say not to take directors loans....

Advice on Dissolution