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Best course of action

No dosh

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Scenario is: Limited company good first year, and filed accounts. Then had to register for VAT, but then business went rapidly downhill, although still has 3 clients that are bringing in a small amount of money. 
Didn't file any VAT returns for 4 quarters, which HMRC is getting aggressive about, understandably. Dereg for VAT last week. Director has no dosh and a large personal debt re previous failed business.

Possible plan of action 1 :set up as self-employed, and move the 3 clients into that business. Look for a job.

Get VAT returns completed and filed. Tell HMRC no longer trading and let Ltd co go hang.

But won't be able to pay the VAT.

Plan of action 2 - move clients into self-employed business, tell HMRC ltd co no longer trading and just leave it there. 

Either way, HMRC is going to be annoyed and I suspect could try to make him bankrupt.

What do you advise?
 

 

 

 

Replies (13)

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By sarahg
21st Oct 2021 07:56

Where did the money go?

Thanks (3)
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By zebaa
21st Oct 2021 09:31

Tell HMRC, they will most likely not take any notice, but at least you have told them for your piece of mind. Director resigns from his company. Ex-director gets a job or self employment. Why do you think he may be made bankrupt ? Do you think the period of 12 months without a VAT return is enough to lift the corporate veil ? What sort of sums involved ?

Thanks (1)
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By Roland195
21st Oct 2021 09:53

If the company is insolvent then you shouldn't do anything further than point this out and recommend speaking with an IP. As he doesn't have the fees to pay them anyway, it's more likely that you will end up with Plan 2 but we'd have to be talking significant sums of money for HMRC to bother trying to go after him personally. A BB loan may be different but as far as I can see will simply mean sitting forever more on the Companies House register until they either give up objecting or the Insolvency Service finds itself at a loose end.

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By Paul Crowley
21st Oct 2021 10:35

The company is insolvent
Do nothing and give no advice on company
But you could take on the newly self-employed client, should he de able to find some clients no longer able to get work done by prior supplier

Thanks (1)
By Moonbeam
21st Oct 2021 10:55

Thank you all for your usual powerful advice. I haven't yet looked at the data - I would have wanted to be paid in advance first. "Prospect" has not been clear enough with me about actual sums, but I suspect this isn't a job I'd enjoy.
I just didn't want to shove him away without a bit of support first.

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Replying to Moonbeam:
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By Moo
22nd Oct 2021 09:29

You want to be paid in advance by seemingly insolvent client?
I'd be very wary of this, if/when the client does get wound up or ends up being sued that could look like a fraudulent preference.
Refer them to an IP. Personally I would disengage after that.

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Replying to Moo:
By Moonbeam
22nd Oct 2021 10:20

No I don't want to be paid anything by an insolvent client. Nor do I want to work for free. That was the point of my post.

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Jason Croke
By Jason Croke
21st Oct 2021 11:40

As Sarahg posted, where did the VAT money go?

HMRC will resist the deregistration because they'll want to see the historical returns filed first in order to see what sort of liability they are missing out on. If the company is wound-up, HMRC may resist, all depends on the amount of VAT unpaid.

Be careful that HMRC do not issue a penalty on the Director personally for failing in their fiduciary duties, whilst HMRC cannot pursue the VAT (as that loss belongs to the Ltd), they can pursue personally for penalties and the penalties are 100% of the VAT due. It'll depend on the VAT owed and whether HMRC believe it is worth chasing down for.

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@enanen
By enanen
22nd Oct 2021 09:29

Refer the client to an insolvency practitioner to review the options.

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By I'msorryIhaven'taclue
22nd Oct 2021 09:57

Side issue, but have HMRC accepted the VAT dereg application?

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Replying to I'msorryIhaven'taclue:
By Moonbeam
22nd Oct 2021 10:22

Prospect has been bid farewell by me now, but he only applied to dereg the other day so too early to say.

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Replying to Moonbeam:
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By I'msorryIhaven'taclue
22nd Oct 2021 11:01

Kicked into touch - good for you!

Somewhere in my dim and distant memory is an applicant for VAT dereg being refused on the grounds that his VAT returns weren't up to date.

Thanks (2)
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By Malcolm McFarlin
22nd Oct 2021 09:58

Sounds like the VAT due is small. VAT returns should be submitted -not sure if you would want to do that if you are not going to be paid. HMRC likely to be less annoyed once the debt is established.

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