Companies House is accelerating strike-offs

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Tardy directors now have only four months to save their company from being struck-off, says Rebecca Cave. 

If directors are late in filing their company accounts, and don’t reply to warnings from Companies House, their company can be struck-off the Companies House register and cease to exist. This procedure is set out in Companies Act 2006, s 1000.

That requires the Companies Registrar to send at least two formal letters to the company, and if no reply is received to either letter, publish a notice in the Gazette to inform the world that the company will be struck off three months after the date of that notice.

It used to take around six months to complete the legal steps in CA 2006, s 1000, but now it can take only four months. This is because the periods between sending the formal warning letters have been reduced from a month to 14 days, and the notice period in the Gazette has been reduced from three months to two. These changes were made by the Small Business, Enterprise and Employment Act 2015, s 103 with effect from 10 October 2015.

Companies House appears to have changed its internal practices to start the process of removing a company from the register much sooner than was otherwise the case. Accountants have been told that if Companies House doesn’t receive a response from a company to three reminders sent over a two month period, it will commence proceedings to strike-off the company.

Example
A Ltd has a year end of 31 March 2015 so it should have filed its accounts by 31 December 2015. Companies House sent three reminders to A Ltd in January and February 2016 but received no reply. The Gazette notice to strike-off A Ltd was issued on 2 March 2016, with a commencement date for the notice as: 8 March 2016.
It has been common practice for HMRC to object to the Gazette notice and prevent the company from being struck-off if tax was due, or was likely to be due. This is necessary because HMRC can’t recover any tax due from the company once it has been struck-off, as then it has ceased to exist (HMRC Insolvency Manual INS5104).

HMRC’s objections to a striking-off can be frustrating for a director who is genuinely trying to close down a failed company – as explained in Any Answers. But the HMRC procedure is needed to prevent the unscrupulous from trading through a UK company then allowing that company be struck off by ignoring Company House letters. 

However, following the acceleration of the striking-off procedure it seems that HMRC may not have enough time to issue objections before a company is struck-off. I have received anecdotal stories about companies being struck off where there is tax to pay. Have you seen this happen recently?

Rebecca Cave
Tax Writer
Taxwriter Ltd
Columnist
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08th Mar 2016 10:44

Using strike off for tax planning

The extent to which companies that owe tax are being struck off with no official enquiry at all is worrying. If I was unscrupulous I would be advising clients to trade as a company for two years, charge customers VAT but not file any returns, not file any accounts or tax returns, then let Companies House strike off the company and start again.

I can't see any problems for people doing this. How are we supposed to persuade people to do the right thing? I told my MP this was happening, and the reply he got back from the treasury was that I should report any companies where I suspect this has happened.....and what about the others?

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08th Mar 2016 11:37

There doesn't appear

to be any consistency. We have companies shut down owing large tax bills and HMRC objecting over a couple of hundred (mind you it was a penalty). We have had a charity (ltd co) struck off yet the charities commision still wanted accounts as the charity was still going. All good stuff.

It's certainly true that Co House are striking off very early for annual returns (maybe the Crown needs the money in the bank accounts).

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10th Mar 2016 10:55

tax planning?
Under these circumstances surely the directors would be personally liable!

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10th Mar 2016 11:25

Using Strike Off For Tax Planning

Oldmanwetmix is right..I have known clients set up, trade and never once filed accounts or vat returns year after year, company after company. Personally liable..? you must be joking..HMRC have never once even attempted to do anything..and on what basis..these unscrupulous directors claim they were trading with an attempt to be profitable but it just didn't work..so..whoopee they now only have 2 months less for the company to be struck off..most of them will be saying thanks that's 2 months less time to get HMRC off my back if they ever bothered in the first place..!

 

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10th Mar 2016 11:26

I recently asked Companies House to not strike off a company that had the notice published in the Gazette and they informed me they wouldn't strike it off but they would commence criminal proceedings against the director(s).

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10th Mar 2016 11:32

that hmrc does not pursue
Does not absolve you from your reporting responsibilities.

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By tomgill
10th Mar 2016 12:19

HMRC OBJECT
In nearly all cases in the past year or so I have found that HMRC object to the striking off then do nothing to follow this up. Anyone had similar experience?

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By tedbuck
10th Mar 2016 12:39

HMRC ARE ASLEEP

I have seen this happen where Directors draw all the money out and then allow the Company to be struck off. HMRC object but don't do anything else and eventually the Company is struck off. HMRC don't even trouble to have a go at the Directors on the grounds that they obviously owe the Company the money that they have withdrawn.

I suppose that it is too much trouble for too little return but this failure encourages everyone else to contemplate the same action.

I too have seen situations where HMRC just don't bother to pursue unpaid, unreturned VAT.

I saw one case where the VAT registration had been there for 10 years unchased and suddenly came to life. Fortunately the Company hadn't been trading but even so it suggests that HMRC is a little less than efficient.

CIS is another area where unpaid liabilities seem to go unnoticed for ages.

One can only assume that it is so easy to collect tax from the "hard working families" that it isn't worth chasing those who can't be bothered to pay.

It may not be practical to chase them all but a few high profile hits might encourage the others. The same would apply to all the little sole traders earning £12,000 a year and living in £500,000 houses. It doesn't take much effort to spot them with all the digital information to hand but HMRC are just too lazy to do it and prefer to do Google and the like for derisory amounts which look big when they hit the Press.

HMRC fit for purpose?  Absolutely not and it's those of us who do pay who pay for those who don't which is really an insult to the real workers.

Yet another case of the smug Osborne thinking he's clever when really he has his eyes shut to reality.

 

 

 

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By tomgill
10th Mar 2016 13:27

agreed tedbuck!

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By k743snx
10th Mar 2016 13:37

Well said, redbuck

tedbuck wrote:

I have seen this happen where Directors draw all the money out and then allow the Company to be struck off. HMRC object but don't do anything else and eventually the Company is struck off. HMRC don't even trouble to have a go at the Directors on the grounds that they obviously owe the Company the money that they have withdrawn.

I suppose that it is too much trouble for too little return but this failure encourages everyone else to contemplate the same action.

I too have seen situations where HMRC just don't bother to pursue unpaid, unreturned VAT.

I saw one case where the VAT registration had been there for 10 years unchased and suddenly came to life. Fortunately the Company hadn't been trading but even so it suggests that HMRC is a little less than efficient.

CIS is another area where unpaid liabilities seem to go unnoticed for ages.

One can only assume that it is so easy to collect tax from the "hard working families" that it isn't worth chasing those who can't be bothered to pay.

It may not be practical to chase them all but a few high profile hits might encourage the others. The same would apply to all the little sole traders earning £12,000 a year and living in £500,000 houses. It doesn't take much effort to spot them with all the digital information to hand but HMRC are just too lazy to do it and prefer to do Google and the like for derisory amounts which look big when they hit the Press.

HMRC fit for purpose?  Absolutely not and it's those of us who do pay who pay for those who don't which is really an insult to the real workers.

Yet another case of the smug Osborne thinking he's clever when really he has his eyes shut to reality.

 

Meantime, we have "the smug Mr Sweetman" popping up on these pages every so often with his little pokes at people like the Barclay Brothers or non-doms, but curiously ignores such dodges as in the scenarios quoted above - which arguably has more of a knock-on effect for the honest taxpayer and the economy in general - perhaps the fact he's ex-HMRC himself?

 

 

 

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