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URGENT Q- Limited Company & Corporation Tax
5 Answers
Hello! I would appreciate any advice on the following as soon as possible...
A friend's LIMITED company (which has been suffering terrible cash-flow problems for some time) has an outstanding Corporation Tax bill. Its trading address is a large industrial unit and its registered address is locally at the company's accountant. Anyway, on Thursday afternoon, my friend's wife called him from home in a panic as a man had turned up at their house, from the HM Debt Enforcement Unit demanding payment immediately. My friend rushed home to be told that if he didn't pay the bill himself immediately, bailiffs would be sent to his home/insolvency proceedings would be started against him or court proceedings would begin.
Surely this can't be right?! This man works extremely hard; he is simply struggling with the business bringing in money recently, but the company's LIMITED- doesn't that make the difference?! If anyone could offer any advice, I'd be very grateful. I'm asking off my own back, as it just doesn't sound like the right course is being followed. Thank you all in advance!
A friend's LIMITED company (which has been suffering terrible cash-flow problems for some time) has an outstanding Corporation Tax bill. Its trading address is a large industrial unit and its registered address is locally at the company's accountant. Anyway, on Thursday afternoon, my friend's wife called him from home in a panic as a man had turned up at their house, from the HM Debt Enforcement Unit demanding payment immediately. My friend rushed home to be told that if he didn't pay the bill himself immediately, bailiffs would be sent to his home/insolvency proceedings would be started against him or court proceedings would begin.
Surely this can't be right?! This man works extremely hard; he is simply struggling with the business bringing in money recently, but the company's LIMITED- doesn't that make the difference?! If anyone could offer any advice, I'd be very grateful. I'm asking off my own back, as it just doesn't sound like the right course is being followed. Thank you all in advance!
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As I understand it - and my business studies were a while ago - a limited company can be limited by a number of methods, one of which is by guarantee, where the directors/owners agree their financial liability if the company is in financial difficulties. It depends on the way that the company was set up, as to whether your friend is personally liable for some or all of the debts.
I'll be interested to see what others say about this, as the above is IMO.
I'll be interested to see what others say about this, as the above is IMO.
Boxtops may be right about companies limited by guarantee but they aren't at all common for commercial businesses.
Wikipedia has this to say.
http://en.wikipedia.o..._limited_by_guarantee
Directors of a limited company do not have a personal liability to the debts of a business unless a loan has been taken out and a director has personally guaranteed the loan - hardly a situation I can think of applying to an HMRC liability.
Shareholders of course have a liability to the limit of their shareholding stake in the business (and I assume that this business has a director who is also a shareholder).
Strikes me that the HMRC people are proposing insolvency proceedings against the COMPANY but not the individual.
This can hardly be a surprise to the directors; corporation tax liability is never (normally) due until 9 months after the end of the relevant tax year of the business.
Wikipedia has this to say.
http://en.wikipedia.o..._limited_by_guarantee
Directors of a limited company do not have a personal liability to the debts of a business unless a loan has been taken out and a director has personally guaranteed the loan - hardly a situation I can think of applying to an HMRC liability.
Shareholders of course have a liability to the limit of their shareholding stake in the business (and I assume that this business has a director who is also a shareholder).
Strikes me that the HMRC people are proposing insolvency proceedings against the COMPANY but not the individual.
This can hardly be a surprise to the directors; corporation tax liability is never (normally) due until 9 months after the end of the relevant tax year of the business.
Ah, okay. Thank you both for your quick responses. My friend's accountant is away for a fortnight, so unable to help.
It is a very mall business to which he is the sole director and I'm almost positive it's not limited by guarantee, so assuming this is the case, surely the guy from HM R&C should have gone to either the trading or registered addresses when visiting? The letter they left is addresses to the company, but at my friend's home address which is also worrying. Thanks again- I'm very grateful!
It is a very mall business to which he is the sole director and I'm almost positive it's not limited by guarantee, so assuming this is the case, surely the guy from HM R&C should have gone to either the trading or registered addresses when visiting? The letter they left is addresses to the company, but at my friend's home address which is also worrying. Thanks again- I'm very grateful!
The company Limited by Guarantee situation is pretty much exclusively for charities. It won't be the position for a commercially set up company and, even if it was, the guarantee is limited to £1 anyway. Red herring there.
No, if it's for Corporation Tax the Revenue cannot directly threaten debt collection on the director / owner. He hasn't personally guaranteed the sum. If however he has been spending money randomly on cars on dividends and cars, etc the company clearly couldn't afford then they could in theory attempt some sort of prosecution for wilful disposal of assets to prevent payment. It's pretty unlikely though. However, they may well liquidate the company over it if it cannot pay its debts and there may subsequently be disqualification from acting as a director for a period of time as a result.
No, if it's for Corporation Tax the Revenue cannot directly threaten debt collection on the director / owner. He hasn't personally guaranteed the sum. If however he has been spending money randomly on cars on dividends and cars, etc the company clearly couldn't afford then they could in theory attempt some sort of prosecution for wilful disposal of assets to prevent payment. It's pretty unlikely though. However, they may well liquidate the company over it if it cannot pay its debts and there may subsequently be disqualification from acting as a director for a period of time as a result.
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