Do I need to pay my accountant

Do I need to pay my accountant

Didn't find your answer?

Company was recently wound up and dissolved.  Very small web design business, only fixed asset is broken laptop.  Accountant chasing personally for payment for previous preparation of accounts but if company wound up with zero assets should I pay this personally as the previous company director.  Understood liability was limited to the company and now this was wound up, with no assets remaining there is no way of meeting this obligation.  Where do I stand on this?  Personally cannot afford to pay the invoice at present??

Replies (44)

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By mrme89
02nd Sep 2014 06:56

Were you issued with a letter of engagement? If so, what does it say?

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By ShirleyM
02nd Sep 2014 07:55

Did the accountant do the work?

If so, then s/he should be paid. I assume you had some money when you approved the accounts, or did you always intend non-payment?

The accountants T&C's probably say the Director is liable, but in any case, it is fraudulent trading to order goods/services knowing the company cannot pay. I hope this wasn't the case here.

Be honourable and arrange a payment plan with your accountant.

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By Jekyll and Hyde
02nd Sep 2014 07:58

what's the accountants charity number?
Sounds to me that you were never intending to pay the accountant and now are on an accountants forum asking for free advice on the legalities of whether you are obliged to pay for said services.

Oh I forgot most accountants are not charities so perhaps you need to speak with a solicitor or perhaps citizen advice bureau.

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Stepurhan
By stepurhan
02nd Sep 2014 08:21

Lifting the veil

From a purely legal point of view there is a good chance you could be made liable.

If the accountant has been sensible, they will have included a personal guarantee in their terms. This makes you liable automatically. Even if they didn't, you as a director entered into an obligation you clearly had no intention of paying. An officer entering into such an arrangement has acted in bad faith, and the veil of incorporation can be lifted. More difficult but not impossible.

So come to an arrangement and stop trying to weasel out of it.

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RLI
By lionofludesch
02nd Sep 2014 08:49

Ask yourself

Why did you ask him to do the work when the company couldn't pay ?

Come on - you're not looking for sympathy on here, are you ?

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By ireallyshouldknowthisbut
02nd Sep 2014 09:13

.

In our engagement letter with clients it explicitly makes the director personally liable in such an event. This is a standard term.

Not withstanding our t&c's if you cant pay now, agree terms.  £200 a month until cleared or similar. 

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Glenn Martin
By Glenn Martin
02nd Sep 2014 09:32

Was Company Wound up by an IP

or did you simply not file the accounts and strike it off from the record.

Whilst the only asset maybe a broken laptop there is a liability of the accountants fee and any other bill you owe.

If you have just struck the company off without involving and IP or the OR then you have done so knowing the company owes money out to its creditors and your accountant then you are indeed a naughty boy.

Do the decent thing and pay the guy as Karma has habit of biting you on the a**e.

 

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By paulwakefield1
02nd Sep 2014 10:11

I thought as accountants

that we weren't meant to jump to conclusions.

"Sounds to me that you were never intending to pay the accountant "

"You as a director entered into an obligation you clearly had no intention of paying"

"Why did you ask him to do the work when the company couldn't pay ?"

 

It may be that this is the case but there is nothing in the OP to justify that level of accusation.

I wonder, if the supplier had not been an accountant, if the replies would have been the same?

 

 

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By SBrennan
02nd Sep 2014 12:40

Do I need to pay my accountant

Lots of unfounded opinions and accusations flying around here.  Yes had every intention of paying for the work but the company's main/only source of income ended suddenly and my personal finances hit a brick wall at same time unfortunately.  Wanted opinions on where people believed I stood legally.  Thank you for all your valuable responses, yes you're right I think a payment arrangement would be best course of action going forward!

I'm actually part qualified/studying from the point of view of having no interest in accountancy before I continue to get shot down on here!  Above is valid question though if taking our 'accounting hats' off as source of income for just one second, would the opinions/advice be the same if we were talking about another supplier?

thank you for those who gave unemotional, impartial, grown up responses all the same.

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Replying to Vile Nortin Naipaan:
By Philip Hoyle
02nd Sep 2014 13:14

Wrongful trading if insolvent

SBrennan wrote:
would the opinions/advice be the same if we were talking about another supplier?

Yes, if you contracted for goods or services at a time when there were doubts as to whether the supplier would be paid, of course the comments would be the same as you, as director, have legal responsibilities to act honestly.  The moment you have any doubts (or should, as a responsible officer, have had any doubts) as to the company's liquidity, you can become personally liable due to the wrongful trading laws for any further debt you allow the company to incur.  So, at the time you asked the accountant to do those final accounts, did the company have adequate funds to pay the expected bill or were you just hoping for the best that something would turn up?  

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By HeavyMetalMike
02nd Sep 2014 12:59

Where you stand legally is that you could easily not pay this and the accountant has little redress.  If he hasn't thought about this, ie getting some payment, or discussing with you before the company gets struck off then i doubt he has any clause in engagement letter re personal guarantee? I don;t have any PG in my engagements, it's all about client managing isn't it, rather than taring everyone?

 

But yes, bad karma, what goes around etc, which you have already said you know.

 

A grown up response.

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By happy
02nd Sep 2014 15:35

Be serious!

Do you really expect to come on an accountants website and expect us all to tell you anything other than pay up!!

Come on you got the accountant to do this work why shouldn't you pay?

Would you walk into Tesco, get a trolley load of shopping and expect to walk out without paying?

 

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By SBrennan
02nd Sep 2014 19:35

It seems 'Happy' is anything but, maybe we should call you 'Angry' from now on.  Your Tesco comparison is just silly, when were you last invoiced for your shopping 6 months after the event you fool!

I have spoken with my accountant and we have come to longer term arrangement, over several months.  Lets hope some of you guys don't speak to your clients the way you act towards new forum members.  Come on drop the sarcasm,  you just sound a bit daft. 

Thanks again for any serious responses.

regards

SB

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Replying to danstopp1:
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By andy.partridge
03rd Sep 2014 11:32

Free

SBrennan wrote:

Lets hope some of you guys don't speak to your clients the way you act towards new forum members.  . 

 

If it were up to me you wouldn't be a member, but seeing as you are you need to remember that you have control over your question, but not the answers.

Clients pay, yes I know you would like to be an exception to the rule, and so the implication that they would be treated just the same as a chancer looking for a freebie is silly. 

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Replying to RedFive:
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By Andreas.MacFarlane
03rd Sep 2014 11:52

How do you know?

andy.partridge wrote:

SBrennan wrote:

Lets hope some of you guys don't speak to your clients the way you act towards new forum members.  . 

 

If it were up to me you wouldn't be a member, but seeing as you are you need to remember that you have control over your question, but not the answers.

Clients pay, yes I know you would like to be an exception to the rule, and so the implication that they would be treated just the same as a chancer looking for a freebie is silly. 

 

How do you know he wants to be an exception? He's just said he had every intention of paying. Do you know something we don't?

 

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Replying to Cloudcounter:
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By andy.partridge
03rd Sep 2014 11:56

Essence

Andreas.MacFarlane wrote:

andy.partridge wrote:

SBrennan wrote:

Lets hope some of you guys don't speak to your clients the way you act towards new forum members.  . 

 

If it were up to me you wouldn't be a member, but seeing as you are you need to remember that you have control over your question, but not the answers.

Clients pay, yes I know you would like to be an exception to the rule, and so the implication that they would be treated just the same as a chancer looking for a freebie is silly. 

 

How do you know he wants to be an exception? He's just said he had every intention of paying. Do you know something we don't?

 


Wasn't that the very essence of his question? If not, what was the purpose of the post?
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Replying to Cloudcounter:
By mrme89
03rd Sep 2014 11:57

.

Andreas.MacFarlane wrote:

andy.partridge wrote:

SBrennan wrote:

Lets hope some of you guys don't speak to your clients the way you act towards new forum members.  . 

 

If it were up to me you wouldn't be a member, but seeing as you are you need to remember that you have control over your question, but not the answers.

Clients pay, yes I know you would like to be an exception to the rule, and so the implication that they would be treated just the same as a chancer looking for a freebie is silly. 

 

How do you know he wants to be an exception? He's just said he had every intention of paying. Do you know something we don't?

 

 

Probably because anybody that had the intention of paying from the outset wouldn't have needed to ask the question.

 

However, it seems the OP has now made an arrangement with their accountant so world order is now restored.

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Replying to RedFive:
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By Barry1971b
03rd Sep 2014 12:16

Surely...

...we can act as professionals & not feel the need to revert to name-calling!

andy.partridge wrote:

SBrennan wrote:

Lets hope some of you guys don't speak to your clients the way you act towards new forum members.  . 

 

If it were up to me you wouldn't be a member, but seeing as you are you need to remember that you have control over your question, but not the answers.

and andy, as to your quote about not being a member if it was up to you. Is that not be a bit petty?

 

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Replying to DJKL:
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By andy.partridge
03rd Sep 2014 12:35

Yes

Barry1971b wrote:

and andy, as to your quote about not being a member if it was up to you. Is that not be a bit petty?

 

Agreed
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By happy
03rd Sep 2014 07:30

Life is FAR to short to be angry :)

SB glad you did the decent thing, no need to call me a fool though.

I am an accountant and I do think clients that buy my services and don't pay are thieves, the same way as people who steal goods from Tesco's are thieves, and by the way I don't give clients 6 months credit, you are lucky if your accountant does.

 

 

 

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By paulwakefield1
03rd Sep 2014 10:10

Not all companies

that go bust are run by rogues or the feckless. They in general have the benefit of limited liability unless there are personal guarantees or wrongful trading. That doesn't make them thieves.

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By justsotax
03rd Sep 2014 12:10

what a sad sad

question to ask...are there any morals left in the world.

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By justsotax
03rd Sep 2014 12:22

isn't the professional

advice - seek legal advice...but that of course would cost money....

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Replying to dgilmour51:
By mrme89
03rd Sep 2014 12:25

.

justsotax wrote:

advice - seek legal advice...but that of course would cost money....

 

Only if you pay the invoice :-)

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By JamesHarden
03rd Sep 2014 12:41

Do I need to pay my Accountant?

Once a limited company is wound up then it has no LEGAL obligation to pay it's unsecured creditors which is what the Accountant's fees are.

I don't think too many professional accountants cover what happens if a business goes bust or into liquidation in a letter of engagement.

So whilst MORALLY it might be appropriate to seek some sort of amicable settlement with your accountant, there is no legal obligation to do so.

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Replying to vtsoftware:
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By Huw Williams
03rd Sep 2014 12:55

What is LEGAL

JamesHarden wrote:

Once a limited company is wound up then it has no LEGAL obligation to pay it's unsecured creditors

 

Depends what you mean by "wound up." 

As a number of people have already said, trading whilst insolvent can mean directors are personally liable for company debts. 

If you simply get a company struck off, you cannot avoid this LEGAL liability.

If the company is formally liquidated, the position is much clearer - but the IP may well have investigated the possibility of personal liability before completing the liquidation.

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By Tosie
03rd Sep 2014 13:59

Solicitors V Accountants

I think as a profession we are far too generous to our clients.Every solicitor that I know insists on payment upfront before they will even write a simple letter.

I would point out to the original poster that your accountant trusted you to pay and that for me is a good enough reason to pay them.

Most small accountants work on very small margins and simply cannot afford not to be paid.

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By Ken Howard
03rd Sep 2014 14:08

My director clients are liable as per lofe

Shame that the OP hasn't committed on whether the LOFE was in his own name or company name, or whether it included a personal guarantee.  

I've never had a director try to put one over on me like this, but to pre-empt it, I've always written the engagement letter personally addressed to the director, signed in his/her own name (signed "Jack Smith" and not "Jack Smith, director, Smith Ltd"), and the opening paragraph including wording such as:-

"We are writing to confirm your instruction to us to help you comply with your legal responsibilities as the director of Smith Ltd",

So, making the LOFE personal to the director, so it's him/her personally instructing me to prepare the company accounts, tax returns, etc., in his personal capacity rather than as an officer agreeing on behalf of the company.

I do this because it's what at least two of my previous employers did and they indeed did manage to benefit from it many times when a director tried to put one over them.

I only do it for sole director/shareholder situations as it's not appropriate when there are two directors, but it's less likely to happen with more directors as the company is more likely to be run properly, rather than the "I'm turning myself into a company" style of the self employed.

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Glenn Martin
By Glenn Martin
03rd Sep 2014 14:19

Can the OP confirm how the company was wound up.

Was it dealt with by an IP or the official receiver or was it simply struck from the record.

This would be more useful than having a go at guys responding to the post.

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Kieran Phelan
By KPEM online
03rd Sep 2014 14:39

Ethical issue

I can understand all the comments above regarding the LoE, personal guarantee, the basis of the windup / strike off etc. All relevant points and we as a profession have to protect ourselves against such circumstances arising.

I think the OP should have went to a solicitor to get this advice. Posting such a question with the wording "Do I need to pay my accountant" can surely only be met with one type of response. He/she did the work, it is fair to assume you asked them to do the work, you make no reference to having any issue with the work..............so yes you do need to pay up.

Glad to see an arrangement has been made to do this.

It is also unfair for the OP to make the point about getting the bill 6 months after the event. Perhaps the accountant should have billed at the time or upfront, but in my opinion the OP should have known or ought to have known a bill would be coming. The OP actually gained 6 months credit so should be grateful to have been given such generous credit terms!

I have to say I do agree with the Tesco comparison. Clients are in business and should know that your accountant needs to be paid. Thankfully my clients pay upfront or by monthly DD/SO so no such issues, but for any extras the vast majority offer payment in advance or can me managed in such a way that this happens as standard practice.

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By EnglandPi
03rd Sep 2014 14:57

This is a legal entity Issue

In law you as a person are a legal entity and a limited company is also a legal entity.  The two are completely separate and cannot be joined except by a directors personal guarantee which makes the director personally liable for a companies debt.

The whole point of limited liability is to keep the two separate.  If one goes bust it does not affect the liability of the other.

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By Beehappy
03rd Sep 2014 17:44

Fiduciary Duty

The accountants I used to work for had something similar and was owed 4K when the company closed.

The solicitors argued a fiduciary duty I think under Section 175 of the companies Act.

They won in court.

So the veil of incorporation can be lifted and the director held jointly liable.  They also got the solicitors costs from memory.

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By HeavyMetalMike
03rd Sep 2014 21:22

Glad you said that about letterheads oga. I used to begrudge 25p for each piece of paper but it's £150 for 500 sheets which lasts nine or ten months. How much time will it take to create (and make perfect) a PDF which needs pRinting off and won't look as professional. (160g btw)

Why do you lot of well off accountants worry about overheads? It's income which makes profit isn't it?

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By HeavyMetalMike
03rd Sep 2014 21:31

What,,,, this wasn't the question I thought I was answering. Darn iPad at home..

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By EnglandPi
03rd Sep 2014 23:17

Fiduciary Duty. Only applies to limited companies that are still trading not to liquidated companies.  Once they enter liquidation only the secretary of state can bring them to account.

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By SBrennan
04th Sep 2014 00:28

Do I need to pay my accountant
Thank you for all of your well thought out answers, veil of incorporation being lifted and personal guarantees are certainly two of the main excellent points to come out of this.
Consider this, through circumstances and probably some error of judgment, you end you up in personal dire straits, financially that is, several months on from winding up the company. If your accountant invoices you shortly on completion of doing the work, you have funds available and have no hesitation paying promptly as you have always done.
The piece of work was probably very quick and easy, submitting dormant accounts for a small company that had no transactions for that financial year. No more, no less.
Months pass, no invoice, you forget, yes people forget (even supposedly responsible ex directors of small limited companies). A few more months pass, an invoice arrives in your inbox from the accountant. Now you have few funds available for basic bills, lifes necessities and you have mouths to feed. So you have to list what is essential, what needs to be paid. I.e do I need to pay my accountant, is it a necessity right now that I pay this invoice when other things are so much more pressing at present. What would be the consequences of not paying this?
Morally, yes we should all pay each other on time for goods and services, but morals and trust too often have very little place anymore in the world, particularly in business, hence the need for well thought out contracts, company law and solicitors.
Someone made good point about client management, and that would be essential in a case like this. Instead of tarnishing a late or non-paying client as a thieving toe rag, and go on a crusade to slap CCJ on them, maybe learn to give them a call, do some debt chasing, find out if there is a problem, horse trade if you have to. Maybe the cost of chasing debts through solicitors is not economically viable for some practitioners in some circumstances, so the above would be a skill I think some need to learn, particularly in a small practice or business with no dedicated credit management team. Much better than quietly fuming, saying this client just has no morals, and I just don’t trust him anymore, the little weasel. Pick up that phone, send a searching email, see what’s going on!

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Replying to agillies:
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By andy.partridge
04th Sep 2014 14:24

Accommodating

SBrennan wrote:
Thank you for all of your well thought out answers, veil of incorporation being lifted and personal guarantees are certainly two of the main excellent points to come out of this. Consider this, through circumstances and probably some error of judgment, you end you up in personal dire straits, financially that is, several months on from winding up the company. If your accountant invoices you shortly on completion of doing the work, you have funds available and have no hesitation paying promptly as you have always done. The piece of work was probably very quick and easy, submitting dormant accounts for a small company that had no transactions for that financial year. No more, no less. Months pass, no invoice, you forget, yes people forget (even supposedly responsible ex directors of small limited companies). A few more months pass, an invoice arrives in your inbox from the accountant. Now you have few funds available for basic bills, lifes necessities and you have mouths to feed. So you have to list what is essential, what needs to be paid. I.e do I need to pay my accountant, is it a necessity right now that I pay this invoice when other things are so much more pressing at present. What would be the consequences of not paying this? Morally, yes we should all pay each other on time for goods and services, but morals and trust too often have very little place anymore in the world, particularly in business, hence the need for well thought out contracts, company law and solicitors. Someone made good point about client management, and that would be essential in a case like this. Instead of tarnishing a late or non-paying client as a thieving toe rag, and go on a crusade to slap CCJ on them, maybe learn to give them a call, do some debt chasing, find out if there is a problem, horse trade if you have to. Maybe the cost of chasing debts through solicitors is not economically viable for some practitioners in some circumstances, so the above would be a skill I think some need to learn, particularly in a small practice or business with no dedicated credit management team. Much better than quietly fuming, saying this client just has no morals, and I just don’t trust him anymore, the little weasel. Pick up that phone, send a searching email, see what’s going on!

As you appear to be so accommodating when it comes to slow payment and bad debts, could I appoint you to redesign my website? I look forward to asking the question in 6 months time, 'Do I have to pay my website designer?'

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By paulwakefield1
04th Sep 2014 07:56

Far too reasonable a response

when the overwhelming view is that you should at least have been tarred and feathered.  :-)

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By HeavyMetalMike
04th Sep 2014 09:25

By client managing I meant the accountant should have foreseen or foresawn (which I know can't be correct) this issue. And discussed a cost with you at the time and kept you aware. 

Ultimately the accountant shouldn't really care about how long he takes to get paid as long as he does, so he should have thought about this. But your gripe is understandably a bill coming out of the blue.

 

Did all that nasty stuff like threats of CCJ and court etc happen or are you just ranting?

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By Tomazaan
04th Sep 2014 10:24

Whose job is it to pick up the phone?

Surely if you have a bill that you can't pay, you should contact the person to whom you owe money, not the other way round?

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By birdman
04th Sep 2014 12:27

Can't see any comments above about the need to send a copy of the striking-off application to all creditors? If the accountant sent his bill after the Co already struck off, then there is indeed no liability to pay (legally). If accountant's bill issued whilst Co still existed, and if he was not notified of striking-off, then Director is liable.

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By justsotax
04th Sep 2014 17:04

agree Andy...

perhaps SB can direct us to a website designer forum...and ask that very question....perhaps they are an accommodating lot....?

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By glenbogle
05th Sep 2014 18:47

Pay what is due

It is morally and legally  right to honour a contract.

As an accountant I get so prissy and upset when people don't pay that this thread is just what I want. You signed terms for a supply of services with your accountant when you ask him to do something. Don't expect that he will give up without a fight.

If you cannot pay at present advise the accountant  and arrange to clear the debt off as  best you can when possible . Everything else is  a denial of your liability. It is unfortunate  that you lost a contract but you need to go out and find new income. That is how it works.

I was emptied from a contract with 30 minutes notice by Lloyds Bank in 2006. Did  that stop my creditors etc  from chasing me - did it hell. I had to get going and pay the vultures  every penny.

 I will pursue every penny I am due.

I love some of the comments on this subject. I may use some of them to respond to a particular person.who thinks it all went away.

 

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By paulwakefield1
08th Sep 2014 09:40

I completely agree with

"It is morally and legally right to honour a contract". However, in this case, as far as we can tell, the contract is not with the OP but with a company. Indeed, unless there are reasons for personal liability as alluded to above, then the OP has no legal liability at all.

You seem to have a different view on clients who legally owe tax. What is the difference?

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