We have a limited company client that has been trading insolvently for some months. We have advised the sole director verbally in meetings and in writing of his obligations.
There are no assets of value (maybe a few hundred pounds of kitchen equipment).
It now transpires that the client has not filed P35s for 2005/06 or 2006/07 which we had prepared and sent to him for signature and submission. He is always very woolly (not deliberately) but we had believed he had submitted the P35s. The company owes in the region of £20k in PAYE/NI and £8k in VAT. We have never received any correspondence in respect of the outstanding PAYE/NI from HMRC and I would be fairly confident that had the client received reminders he would have passed the papers on to us. We were aware of the VAT situation and that the client was making irregular payments to pay off the liability. He had been dealing with the VAT office himself on this.
The director has a significant overdrawn loan account. This has arisen due to the director taking "dividend" payments (in addition to a small salary) for which profits are not available to cover. The payments are not excessive, what I mean is the director has not been living up at the expense of the company.
The director does not have the approx £5k required to pay a liquidators fees.
My questions are:
1. In the experience of others, how likely is it that HMRC will wind up the company?
2. What is my firm's exposure in this - are there any reporting requirements?
Any advice would be much appreciated.
Anon
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Replies (2)
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1. Very likely, when it gets referred to Worthing
2. No - just comply with the office holder when it goes into Liquidation
The director could apply to have the company struck off - see similar recent post
ML Reporting
As far as the possibility of a report to SOCA being required under MLR 2007 / PoCA 2002 the key questions will be (i) has the director acted dishonestly (or dishonestly failed to take appropriate action) and, if so, (ii) has a benefit been obtained by anyone (whether by gaining something or by avoiding a payment or liability - whether temporarily or permanently).
An action (or inaction) is in law dishonest if:
(a) it is dishonest by the standards of ordinary and decent people, and, if so
(b) the suspected person himself realised that his action / inaction was dishonest by those standards.
So a report is required if you know or suspect that the answers to (i), (ii), (a) and (b) are all yes.
Of course in deciding you will bear in mind particularly your client's actions actions / inactions AFTER you advised him of his responsibilities (when he presumably realised what his responsibilities were).
A final thought, has he been sending in NIL PAYE monthly payslips (when actually PAYE payments are due)?
I hope that helps.