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One-Man Company Moved Abroad - What Can HMRC Do?

A client has a one-man company that ceased trading in autumn of 2010, though the company has not yet been struck off. The previous accountant had never filed any CT returns (3 years' worth) covering the entire period of trading. So, we prepared returns and the striking-off form and sent to the client, who has now permanently moved abroad (to Australia). Owing to being caught up in the Queensland floods he has only recently returned the signed CT returns, etc. HMRC are chasing outstanding CT, based on estimated assessments, though with the returns filed the actual tax due will be somewhat higher.

Question is this: if the client, despite our advice, chooses to be - shall we say - "extremely tardy" in paying the tax, what recourse does HMRC have to collect it? I seem to recall that if it was a personal liability (and he has paid his personal tax), then some sort of reciprocal arrangement exists between HMRC and their counterparts in some foreign jurisdictions, but what happens in the case of a company with a sole director/shareholder who has permanently emigrated? I would assume by now that the registered office is returning all post to sender - originally everything was supposed to have been cleared up by now and the company struck off, so I expect the current occupants of the address will be getting personal visits from HMRC's goons.


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18th Aug 2011 11:21

Corporation tax is a company debt not the Director's. All HMRC can do is liquidate it and be a creditor. I doubt there are any assets(?) 

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18th Aug 2011 11:48

An add on question

Looking at this issue, I feel I do not have the knowledge to answer precisely. But one thing that stikes me as odd, or a possible issue is what has happended to the funds in the company? How were these distributed? Were they distributed as salary or dividends? If dividends, then were sufficient accounts drawn up to support the dividends taken per year (after taking into account corporation tax payable). I cannot imagine that an accountant would prepare accounts and CT liability figures, file accounts with companies House and not file CT600 with HMRC. So am assuming that no formal accounts were actually prepared. If accounts were prepared, then why were CT600's not submitted, was this to defraud a creditor?

As the company has a creditor, then I would assume that it is not possibly to simply strike the company off, but to have it correctly liquidated.

I would consider that the director has a duty (company still not struck off) to safeguard the assets of the company and a duty to provide informatin to the liquidator and perhaps as a result the liquidator could consider that any distributions to the director may be unlawful and consider that these are loan? If so, HMRC could fund the liquidation and seek for the liquidator to chase this debt form the director. The costs may not be worth it for HMRC.

I would normal say that a creditor is the creditor of the company and not its directors, but wrongful trading rule may sometime apply. Sorry for not being any help, but I find this type of question interesting to get various views from experts on this forum. I am not one such expert.


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18th Aug 2011 12:05

Directors problems

Further to my earlier statement. Let's get real. The director resigns with form filed at Cos House.

Who would chase him in Australia.- Not HMRC or the Insolvency Service unless there were large sums involved and not for Corporation Tax 

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19th Aug 2011 08:51

I didn't think

that the last man (director) standing could resign as there has to be at least one director.

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19th Aug 2011 09:17

In practical terms - no

A company cannot validly operate without at least one director, however in practical terms it is impossible to refuse the resignation of a director, even if he/she is the last director in that company.

The problem then falls back on the shareholders of the company to appoint a new director, but if the company shareholder was also the only director (and has just resigned), then company law is simply frustrated.

The old director cannot be forcibly reappointed or have his/her resignation blocked by companies house as this would create more problems than it solves.

The company would be in the same position if the sole director died.

Ultimately, if the company continues to exist in this state for any length of time then companies house will strike the company off and all assets will be subject to bona vacantia. Any creditors (including HMRC) would then have to pursue the former directors on a personal liability basis.

There are provisions in the Insolvency Act to pursue anyone who had been a company director in the proceeding 3-years, however if a company is simply struck off for non compliance with the companies act, it would seem to be outside the scope of insolvency law (unless it could be demonstrated that the company was trading while insolvent prior to striking off). If the company has also ceased trading then this would again be difficult to prove.

All in all, there is very little that HMRC or any other creditors can do in this circumstance other than attempt to use civil recovery in Australia, but this would be a time consuming, costly process with an uncertain outcome.

Given all of this, unless the outstanding debt was substantial, it would more likely lie on file with no further action other than the writing of some inflamatory letters.

It is disappointing when owner / managers conduct themselves in this way as it makes things difficult for those of us who do uphold our responsibilities and when our companies are no longer viable, wind them down properly using reserves to pay off all creditors including HMRC even if that means contributing our own personal funds to the liquidation.

However, as well as being old fashioned, I am also obviously stupid as this was how I dealt with both my previous companies, to the benefit of its creditors and to the detriment of my bank balance.

It was however, critical to my own reputation and self respect.

That seems to be what is missing in the case of your Australian client.

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22nd Aug 2011 10:16

Thanks for the feedback

Thanks to all. Interesting particularly is the company law aspect re the creditors (in this case just the director and HMRC).

Ultimately it's up to the client of course - I'll advise him to pay, and of the risks in not doing so. Will be interesting to see how it pans out, all I can do is make sure I'm clear ethically and legally.

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22nd Aug 2011 12:29

I am interested as to how this affect his residency rights in Australia though, I presume upon his application he had to identify any business interests, creditors etc?

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22nd Aug 2011 14:54


I have no idea - not familiar with that aspect of things.

He is an Aussie citizen anyway - he was/is returning home, so perhaps such factors aren't relevant.


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