Liquidation- implication for director

by **PPaul** on Mon Jul 18, 2011 4:53 pm

We have a new client who was trading through his limited company- sole director/ shareholder. Over the last two years, the company has accumulated huge debts including approx £16k to HMRC (VAT, CT, PAYE and S419) and overdrawn bank account which has been secured on his personal g’tee.

Co. has no funds at the moment and all returns are outstanding (CH and HMRC). The DCA is overdrawn by about £20k which he is not likely to be able to pay back. Therefore we are wondering what course of action is available. There are CIS taxes to claimed from HMRC but it might not be possible as the accounts have not been finalized, due to unpaid fees. Liquidating the company could be the course of action but he is unlikely to be able to pay the liquidator’s fees which we understand could be starting from £4k. Companies House is in the process of striking off the company but we are unsure how far HMRC would pursue him personally to submit the returns outstanding and pay the outstanding liabilities? We suspect that the bank will pursue him personally for the overdraft but what about HMRC? What is the worst case scenario for him personally? He is currently trading through a new company and is up to date with his taxes on this one.

Any views would be appreciated.

Thanks.

by **mullet** on Mon Jul 18, 2011 6:12 pm

He is currently trading through a new company and is up to date with his taxes on this one.

Is this his second company? Or does he have a longer track record of walking away from debt-ridden companies? HMRC will not be impressed at all, and if any of the debt relates to unpaid PAYE in respect of your client's own salary/fees etc then they may consider making him personally liable using the appropriate regulations.

by **Incredulum** on Tue Jul 19, 2011 10:30 am

Companies House is in the process of striking off the company

They will need HMRC's permission for that.

by **PPaul** on Tue Jul 19, 2011 6:10 pm

@mullet
There are no other previous companies that he owned or defaulted. He was a sole-trader previously. The salaries that have been paid to himself would probably not be considered high - for example, for a specialist roofer or a qualified electrical supervisor,a salary of £15k for full time work. In some cases the salary could be less than the minimum wage as well, for example a lower salary and a high div tax planning scenario.
Under what regulation can HMRC consider making him personally liable? Any links to appropriate source would be quite helpful.

@Incredulum
"They will need HMRC's permission for that."
Could you please point out to where we can find more info on this/legislation? From our understanding CH can strike off the company if the returns/accounts have not been filed. This is not a liquidation case, therefore we were of the opinion that CH will strike it off straight away.

Thank you.