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Directors unable to pay CT liability

Directors unable to pay CT liability

Client has decided to sell own home to pay off CT, as they have been given more time to pay if they submit a solicitor's letter of undertaking. I am unsure however, if there is not enough funds to clear the mortgage and the CT, what action would be taken against client by HMRC. Would this letter be legally binding against them personally?


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19th Dec 2006 16:15

Ooh no..
I would recommend extreme caution. This is a company debt, not a personal debt of the directors. I'm an insolvency practitioner and I've seen directors throw all the cash they and their families can get after failing companies. Are they absolutely sure? What are they being asked to offer - an undertaking to the company? to HMRC? To introduce funds or to discharge the company tax laibility? They need to be very careful in what capacity the undertaking is offerred - as directors? shareholders? individuals? If the company obtains a solicitor's undertaking from them to introduce £x and then the company fails they may well be personally liable.

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By djw090
19th Dec 2006 17:09

What is wrong with the business model
As has already been said the directors need to be very sure they are not throwing good money after bad.

What is wrong with the business model that is generates taxable profit but not cash? If the cash has gone to fund expansion such as debtors and fixed assets can any funds be raised against these? Is it that the directors have been paying too much of the cash generated to themselves? What does the 2 year forecast look like?

If these questions can't be answered they should not do it.

The last thing most of us would touch is our house.

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