HMRC liability and closing a Limited Company down

HMRC liability and closing a Limited Company down

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As the result of an HMRC investigation into previous years my client ( who I signed up 12 months ago) has received an assessment for underpaid corporation tax over 5 years because of errors in the capital allowance calculations.

The Company cannot pay the amount owed at this moment in time and it is arguable whether they would likely to be able to pay much  in the foreseeable future.

Does anyone have any experience of negotiating with HMRC in a situation where their assessment may push a Company into liquidation?

My inclination is to suggest to the Company that they consider dissolving the Company, letting HMRC know (as the only creditor) and see what happens. The Company could not afford to appoint insolvency practitioners.

There are no balances on the Directors Loan Account.

A new situation for me so any guidance would be appreciated.

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By lionofludesch
16th Jul 2016 09:15

I wouldn't like to be involved in this.

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By User deleted
16th Jul 2016 19:22

Assuming this is not case of phoenixism, write to HMRC saying the company has no resources to pay the tax owed. As a solution invite them, as a creditor, to wind the company up and recover whatever is available. Give them a reasonable deadline and if no response is received shut the company down. End of.

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Replying to User deleted:
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By bernard michael
17th Jul 2016 11:01

Who prepared the previous 5 years' CT return ? Is there a PI claim against someone?

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By soundadvice
18th Jul 2016 10:27

Re phoenixism.

The client would not set up another Company but would start up the trade again as a sole trader; is that OK or would that be phoenixism?

The client is an artist and designer

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By soundadvice
18th Jul 2016 10:25

The previous accountant prepared the 6 previous CT returns. The basic problem was that he continued to claim capital allowances on a vehicle the Company no longer owned.

A bizarre situation because it is a one man company. The Company owned one vehicle up until 2011 then sold it and from then on the client used their own vehicle and the accountant put 45p per mile through whilst still claiming the capital allowances on the vehicle (after it was sold).

There was an HMRC benefit in kind investigation in late 2015 which has revealed the problem.

There is underpaid tax because of these incorrect capital allowance claims.

However as I understand it the previous accountant would not be liable for unpaid tax as a result of the error just any fines or penalties. Is that correct?

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Replying to soundadvice:
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By bernard michael
18th Jul 2016 10:40

He could also be liable for any damages suffered by your client eg loss of income if it could be proved to be caused by the old accountant.Has he been notified of the problem and the potential PI claim?

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