IT Contractor Considering Bankruptcy

[GenericITContractor]

Hi,

I'm currently about to embark on a First Tier Tax Tribunal appeal against a HMRC VAT Penalty that would not be possible to pay (circa £200k). But I was shocked that the costs of the legal fees required in the tribunal itself may amount to £30k or more, and then they do not guarantee a win (of course), as a non-homeowner (we rent), without any assets of real value, and no significant savings, I am considering bankruptcy as an alternative option.

Would it be possible to have my wife (or my parents) become director of my limited company, wherein I resign as director, and take only an employees salary.
What level of salary would be seen as sufficient, would there be an issue if the salary was low?

Secondly, how far back through bank accounts do they usually look, considering that the first point of even considering bankruptcy here would have been on Sunday. Other than this HMRC penalty (which I would dispute), I am otherwise in fine financial status, so it irks me that I would in essence be giving up the fight on what I believe in, but from a pure stress and financial levels, I have to consider if bankruptcy is an option here, and would appreciate any advice.

Thanks for your time.

[BrilloPad]

I have asked for PM rights for you. You might get more via PMs.

I have been considering bankruptcy. But I would not contract again. Certain industries will not take on bankrupts. I would probably go on the rock n roll for a year.

EDIT: you might find this thread interesting http://forums.contractoruk.com/busin...ankruptcy.html

When you have had a think, please PM me and I will see if I can help further.

Don't worry when NLUK suggests you ask your accountant. He does that to everyone....

[eek]

As bp says give up on contracting enough places will say no that it's not worth it. Plus you don't keep what you earn so what would be the point.

A bigger question is how you have ended up in a tax tribunal for vat?

[GenericITContractor]

I don't work in the legal or financial industry and haven't seen anything in my recent contracts that would Indicate bankruptcy would ruin my career.

The stress of the entire situation is getting unbearable but I don't want to walk blindly into something that could be a bad decision

[SueEllen]

If you make your wife or parents directors you will still fall foul of the law as you will in effect be a shadow director.

[VillageContractor]

Hang on a sec, did you say that HMRC wants £200k worth of VAT payments??!?!?!

How on earth is that even possible? If that's true then financially you're not fine and contracting isn't for you

[VectraMan]

If you really are on the hook for £200K then I would imagine whatever future pain results from bankruptcy it would be less bad than having to try to repay £200K. I know of a couple of people who have been through it (for legitimate reasons) and they always said it wasn't nearly as bad as people make out. You probably won't be able to work in finance, but there are plenty of other jobs.

I can only assume you didn't pay your VAT for several years. I don't know how you can dispute that.

[Scruff]

Bankruptcy will not save you from the potential effects of VAT fraud. Better spend your time processing the claim. How the hell you can accumulate £200K of unpaid VAT boggles my mind.

"Do you have an Accountant?" is a more likely question than "What does your Accountant say?"

[fullyautomatix]

If you could dodge hundreds of thousands of tax money and then blow that all up on a rock and roll lifestyle or stash it in Panama, then go bankrupt, everybody would do it. Something does not add up here, who is liable ? Your company or you personally ?

[GenericITContractor]

Hi,

Thanks for your responses so far.

The penalty was against a former company I was Technical Director of. The penalty was owing to essentially putting the wrong VAT number on purchases - the VAT was paid as part of another company (which has seen closed down), but the HMRC are chasing the company for the VAT on the original company, not the one on which it was paid. I then received a personal penalty of 50% of the amount.

This happened three years ago, prior to my contracting.