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Ltd Co client cannot pay corporation tax

I have a Ltd Company client who has no prospect of paying a £10K coporation tax bill due 1st January. The reason for this is that he funded very expensive private medical expenses (not of a cosmetic nature) straight from dividends out of the Company. This bill relates to the year ended 31st March 2012 and trhere will be another similar liability for the forthcoming March year end that will also not be able to be be paid.

I cannot help but think that Revenue and Customs are not going to be sympathetic despite the medical condition as its a case of living to your means and had he been salaried the medical expenses would not have been possible.

Despite my view, I do not know what to do next. Client is talking about walking away but I do not know of the ramifications given his deliberate avoidance of paying his tax.

Would he be directed to an insolvency practitioner at this stage to close the whole thing down or are there any other views of what should now be done.

Thank you 

  

      

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By BKD
07th Feb 2013 12:57

For £10k

I'd be speaking to HMRC and asking for time to pay. HMRC don't like dividends, but despite what some Officers seem to think that does not automatically rule out payment terms. The question is whether or not there is any realistic prospect of the company being able to stick to an agreement.

You say that the liability for the year ending 31 March 2013 will not be able to be paid. Since that is not due until 31 December 2013, how do you know? If it is known with certainty that there is no prospect of the company being able to meet its future obligations, then dissolution may be the only way forward. What assets and liabilities exist at the moment?

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By Glennzy
07th Feb 2013 17:16

I am Confused at the post

firstly it does not matter what he has taken dividends for as if the company has made sufficent profits then he is entitled to withdraw that retained profit as a dividend. Are you saying he has withdrawn dividends greater than the reserves in the company so it is now has an overdrawn balance sheet. If that is the case he is effectivly trading illegally, and needs to repay the overdrawn dividends, but i guess if that is the case he probably has blown the money and cannot do this.

HMRC should listen to a payment plan if there is scope for him to trade through it, failing that there is 3 options open to him really:

 

1. Get a few grand together and appoint an IP to wind the business up.

2. Get about £900 together and go and speak with official receiver to wind it up.

3. Do nothing and wait until someone gets sick like HMRC and they wind it up for you. 

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