Hello, let me quickly say, I'm not looking for an answer here, I'm looking for someone to suggest who I should speak with, be it themselves, their firm or some superhero they have worked with!
I never claim to be more than a GP and a salesman and I've inherited a nightmare client problem from my recent acquisition that I’ve got only a very vague outline of how to tackle - let me outline it for you:
Client had a successful business and was sold a tax strategy a few years ago sheltering £500k. The strategy is - in my opinion – rubbish. It’s a variant on EMI, granting unpaid shares to an employee and letting them take cash from the business writing off all the costs against the P&L. The strategy itself is not however the immediate issue. (For those in the know, the strategy is called “E-Shares”)
The problem with this strategy – and what makes it rubbish - is that the employee can never leave the company nor can the company ever go into liquidation without the unpaid share capital being paid in full.
Unfortunately, the business came to a natural end during 2012 and ceased to trade. My client paid up everyone and was going to leave the company dormant and so keep the liability for the unpaid share capital at bay, but the local council continued to send council tax bills to the former premises and eventually issued and obtained a winding up order and forced the company into compulsory liquidation.
In the meantime the accountant who sold this stuff died having advised the client to let the company go.
Now, although the local council are claiming £40k, I could still cope at this stage as we could get a friendly IP to apply for a rescission order for the client, getting them to make payment to the council (painful but not life threatening) and then sit the thing dormant waiting for the inevitable APN or taking up the solutions offered by one of the 3 other tax houses who reckon they have solutions for the e-shares fiasco.
But, HMRC have raised a Regulation 80 determination for unpaid PAYE protectively to the OR’s office and now the creditors are the £40k to the Council and £570k to HMRC. In other words, securing a rescission order appears impossible to me as the client hasn’t got £610k – which means the liquidation stands and the OR wants the £500k unpaid share capital due from the client personally or will make them bankrupt (which of course they don’t have and even if they do somehow find it and pay it, doesn’t solve the likely eventual R72 or R81 that will follow at some stage)
Know anyone who can solve this?
Replies (3)
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Interesting One
Are you sure the company is still your client now that it is in liquidation and how will you be paid for future work? I guess the director is the person that is also your client and whom you are trying to protect?
Are we led to believe that the client (director) saved £0.5M by some sleight of hand involving unpaid share capital and that the said £0.5M has been spent and no longer available to pay up the shares? I find it difficult to believe that leaving a company dormant for a few years would discharge his liability for the unpaid shares and give him a £0.5M gain on the deal - in fact it sounds like the worst devised tax scheme in history.
My advice is to walk away from the matter - I certainly have no sympathy for what seems to be a racket. If I've misunderstood any of this please enlighten us and we can reconsider.