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Folding Ltd Company to avoid late filing charge

Folding Ltd Company to avoid late filing charge

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I have a LTD company that has only made a few hundred pounds profit each year for last few and probably none at all in last year. I had moved to paperless working with HMRC seemingly so I didnt get the usual paper reminder letter for annual accounts and they are now just under a month over due £150 fine and about to go to £375. This is way to stiff for a small business who is vrtually not trading. Had been thinking of finishing with all the hassle if being LTD anyway as it is dubious at the benefits for a small business anyway. I have about £500 in the business bank account which unfortunately is locked just now as they require a 4 digit PIn which I have no idea what it is so unfortunately means I cant access the accounts to do them. Thinking I might as well just use this as an oppotunity to wind up the company to avoid the late filing fees to be honest. Is this something that I can do and they wont purse the £150 from the money in the bank? I will likely have no corporation tax due to them but do i just ignore that which is due 6 January as company will have ceased trading or do I have to do that still? Will they try and recalim the penalty from the money in this account?

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By johngroganjga
27th Dec 2013 11:44

Yes if the company is struck off the late filing fee liability will disappear.

But before you ask for it to be struck off you need to get the company's corporation tax affairs up to date and settled (or else HMRC will object to the striking off) and you will need to liquidate all the company's assets (including its bank account) and distribute them to yourself (or else they will be forfeited when the company is struck off).

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By 83dons
27th Dec 2013 11:54

Thanks

Ah ok thanks very much. This sounds like a good time to wind things up and not have to pay £375 for nothing as it were. So basically I need to:

- Unlock the bank account and redistribute any remaining funds

- Complete the regular Corporation Tax return for 6 Jan and pay any tax

- Apply to have the company struck off and ignore any late filing penalties from Companies House for annual accounts for the period 9 months or so hence

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By 83dons
27th Dec 2013 11:56

Is there any benefit to actually making the annual accounts submission to Companies House anway along with the tax return? Then put in the request to be struck off to avoid the late filing penalty?

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By johngroganjga
27th Dec 2013 12:30

If the accounts are late the late filing penalty will crystallise and require payment.  The late filing penalties that disappear on striking off are only those that relate to unfiled accounts.

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By 83dons
27th Dec 2013 12:56

That is a little confusing. So your saying best not to make the annual accounts submission at all?

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By johngroganjga
27th Dec 2013 13:05

Yes if you are going to strike the company off don't file any overdue accounts with Companies House.

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By 83dons
27th Dec 2013 13:10

Ok thanks for clarifying. So what about the Corporation tax return for the same period I should file that? Seems a little strange to do one but not the other. Also would I put a termination date as of now or sometime within the accounting period in questions (ie 11/12 financial year)? Essentially it hasnt been taking any new business since back then anyway.

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By johngroganjga
27th Dec 2013 13:12

Obviously you'll need to submit the accounts to HMRC with the tax return.

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By zebaa
27th Dec 2013 13:40

Just quit...

...That's to say simply resign as a director of the company & let companies house know. Then after some delay companies house will kill off the company and any debts will go with it. This will, of course, include any money owed to you. No tax forms required either.

You can tell HMRC you have resigned as director but then should not answer any letters addressed to the company after your resignation. However HMRC will most likely ignore your letter and continue to send dire warning letters to you, so you may choose to not bother HMRC and save the cost of your stamp.

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By 83dons
27th Dec 2013 14:06

Think id prefer to do it the correct way and complete the companies house striking off form and complete the HMRC corporation tax return (likely to be zero anyway). Im really just checking that if once I close the bank account, complete the tax return and the striking off form that I wont be liable for the ever increasing late penalties for not handing accounts in to Companies House. I also dont really want a LTD company any more so this really sets it all in motion anyway. I dont have any money due to anyone so cant see being any issues.

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By Tosie
27th Dec 2013 20:53

order of events

submit accounts to hmrc before applying to strike off.You are supposed to advise interested parties that you are making application .

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By zebaa
28th Dec 2013 12:26

Why?

83don said

'Think id prefer to do it the correct way and complete the companies house striking off form and complete the HMRC corporation tax return... '

The advice I gave you is correct. If you want to file forms that are not needed that is up to you - oh, and by the way you may well have pay several hundred pounds for the accounts drawing up and filing.

Look at this way: if you want to get to a destination you can either drive or crawl on your knees, - it seems to me you are crawling. But, like I say, your choice.

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By johngroganjga
28th Dec 2013 12:33

Why? Because the correct way is lawful and ethical. Zebaa's suggestion is not. It is to OP's credit that he wishes to do things the correct way.

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By zebaa
28th Dec 2013 14:42

@John

John, I note your comment that my advice is unlawful. If you would like to provide any reference to back up that slur, I would be interested to read it. What we are discussing now is a matter of company & fiscal law, not opinion. In other words what is needed, nothing else.

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By johngroganjga
28th Dec 2013 14:55

Submission of company tax returns is a legal requirement.

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By zebaa
28th Dec 2013 17:23

@again John

John said -

Submission of company tax returns is a legal requirement.

John, that only applies if the company is in existence . Further, that obligation applies to directors, if there are no directors there can be one one with that obligation.

 

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By johngroganjga
28th Dec 2013 17:30

Exactly. This is a company that still exists and has one or more directors.

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By zebaa
28th Dec 2013 18:54

John, why do you think that...

...if the OP resigned as a director that the company would still have directors? Or that the company would exist for long after that?

It simply makes no sense for the OP to continue along the path you advised.

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By johngroganjga
28th Dec 2013 19:36

I don't think either of those things. Why do you think I do?

You are entitled to your opinion as to what the OP's best course of action is, but to his credit the OP has seen your suggestion for what it is, and you will see that you are in a minority of one in this thread.

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By Tosie
28th Dec 2013 21:10

middle view

Many clients would be happy to go down the route of resigning as a director and let companies house strike company off. However the o.p. has stated that he wants to do the correct thing and the correct thing is to submit the accounts and pay corporation tax due.

Personally I would not be happy to advise a client to avoid paying corporation tax but may have a different view if there was no tax due. I assume in this case nobody really knows whether  tax is due or not although op believes there is no liability.

It may well be that by trying to do the right thing the op causes more problems for himself as it is unlikely to be able to get accounts prepared and filed within a couple of weeks. In which case he will incur a late penalty for ct. return creating a liability that he would not have had if he had just let companies house strike company off.

Recently HMRC have increased the number of objections to companies being struck off.

Difficult decision.

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By ShirleyM
28th Dec 2013 21:20

Let the OP decide

I have found that many clients want to follow the accepted process (ie. do it properly) even if it is little more expensive. They want to know they can sleep at night and have complete peace of mind that there will be no comebacks.

The letters from HMRC alone would cause a lot of worry to many clients. You need quite a thick skin to follow zebaa's suggestion, and not worry.

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By 83dons
30th Dec 2013 09:33

The company was definitely in existence for the 12/13 tax year which is when I am required to do a tax return for. I think I may not have made profit but will need to do the sums. It should be no bother to do the paperwork before the 6th January so will just submit it prior to then. My problem is my business bank account who are posting me forms in order to unlock my account so I can double check the accounts are correct. I am just interested in avoiding the £375 now fine for companies house accounts filing which i dont think balances out the need to keep LTD after my name.

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By zebaa
30th Dec 2013 12:38

@83dons

83dons:

At the risk of extending this post beyond a readable length I think you do not understand when  you have an obligation to file a company tax return, for the company you own. While you are a director you have an obligation. If you are not a director you do not. A shareholder does not have an obligation to either elect a director or file accounts. If there are no directors Companies House will close down the company. This closure will cost nothing. Once a company has been closed down HMRC will not - can not - ask or demand accounts, because the company is no more: it is dead.

I also suspect that you will find it difficult file a CT600 before 6 January at no or little cost. My further suggestion is you look into what is required and to consider the cost in terms of money, time & worry.

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By 83dons
30th Dec 2013 12:54

Myself and one other director and a secretary were all in place for the tax year discussed 12/13. It is only in lst 3 months that no trading has taken place although noone has officially resigned from their role as it were. I would not want any comeback on the other director or sec over this so for the few hours work and probably no tax due I think its worthwhile in this case. I have completed the tax return myself fairly easily at no cost save the few hours work every year so. The only thing I find annoying about it all is that the inland revenue try and make it as awkward as possible for the verage person in terms of terminology and subtle changes each year to the form which is clearly aimed at keeping accountants in profession :)

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By tonyh
30th Dec 2013 13:02

zeeba

Over the years I have had many clients who have let ltd companies go by simply not filing annual returns but I cannot recall advising a director to resign. My understanding is that if a director precipitates the removal then the former director can become liable for debts.

Am I wrong ? I must admit to being intrigued by your suggestion.

How quickly do c.h. remove company once there are no directors ?

Thanks

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By tonyh
30th Dec 2013 13:33

Bit of cheek

"The only thing I find annoying about it all is that the inland revenue try and make it as awkward as possible for the verage person in terms of terminology and subtle changes each year to the form which is clearly aimed at keeping accountants in profession :)"

You were happy to come on to this site and ask for advice which has been freely given and then suggest that we collude with HMRC to make things difficult.

Many people are aware of  their limitations and prefer to pay accountants to ensure that they fulfill their legal obligations not only to HMRC  but also interested third parties

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Stepurhan
By stepurhan
30th Dec 2013 13:58

Smily Face

GIven that the OP followed that statement with a smily face, I assumed it wasn't meant seriously.

The point they make is deadly serious though. Having had to use it once myself, I can vouch for the HMRC CT filing software being terrible. Since it is presumably intended for people that, for whatever reason, wish to do it themselves, this is appalling. Even as a qualified and experienced accountant I found it unhelpful at best, and positively faulty in parts. The security requirements and malfunctioning auto-save alone make it unfit for purpose. Unfortunately the feedback link at the end of the form does not work.

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By 83dons
31st Dec 2013 14:41

Keep your hair on! My point was mostly in jest although the serious part is why the HMRC filing software is so laborious for what is a fairly straightforward task if your not running a large company and have kept decent accounts.

 

In terms of the actual point of this thread I have completed the Striking Off form for Companies House with both directors signing it but not submitted yet until the assets are available to free up and tax return done. I wasnt sure what date to put on the striking off form so I guess just best to go with the last week in January once the above two things have been done.

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By listerramjet
03rd Jan 2014 11:41

doh

virtually no trading, likely no tax due.  company has small bank account asset and shareholders.  the somewhat heated debate is about paperwork.  Doesn't seem to be anything "illegal" in either approach.  Calm down guys!!!

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By andrew.hyde
03rd Jan 2014 11:52

No such thing as a free lunch

Surely the bottom line is that incorporation is a privilege that gives you protection from creditors under the law.  The law also requires certain things to be done, and that's (part of) the price you pay for the privilege.

It does seem to me that there is a tendency to regard the law as a menu from which you can choose what you like, and then just eat the stuff that tastes nice.  On the contrary, you have to be able to eat everything on the menu if that's what is required. Rather like Mr Creosote in Monty Python's The Meanng of Life

Bon appetit.

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Replying to Runagood:
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By listerramjet
03rd Jan 2014 12:05

OK but

@Andrew - given that there is no value in it, and no one to have an interest apart from the shareholders - then there is no lunch to pay for!  Surely you don't think we live in a Jobsworth paradise?

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By mikanary
03rd Jan 2014 12:55

Hmmmm....

...if the OP wants to 'do the right thing' then file the accounts (which are late) pay the late filing penalty and then distribute what's left before closing down the company. Simples!

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By andrew.hyde
03rd Jan 2014 13:01

Free Lunch Part Deux

The value is surely in the members' protection from creditors (or 'corporate veil' as it's sometimes called). 

It doesn't matter whether they actually needed protection, or indeed whether there was anything to protect.  If I buy insurance and the insured risk doesn't crystallise, I still pay the premium.

 

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RLI
By lionofludesch
03rd Jan 2014 13:04

"The right thing"

Gentlemen

Surely the point is that the OP needs to satisfy HMRC that there's no tax to collect or they'll object to the striking off.  He does need to submit a CT return.

However, there's no need to submit the accounts to Companies House.  Who would that benefit if the company is no longer trading ?

Just pay the £10 fee for the striking off application.

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By carnmores
03rd Jan 2014 14:42

this is a very simple matter that has been overcomplicated

the last post by the lion is simple direct and the correct advice

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By Tosie
04th Jan 2014 22:48

re carnmores

yes agreed precise advice given by John in first reply 

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Replying to PERMON:
RLI
By lionofludesch
05th Jan 2014 12:23

Indeed

Tosie wrote:

yes agreed precise advice given by John in first reply 

Indeed he did.  Took us seven days to get back to the same point.

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