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HMRC Freezing bank account

Client has not filed accounts

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I don't know if I should be pleased or concerned as a client contacted me yesterday saying Ltd Bank Account has been frozen

When he contacted the bank, the bank said HMRC has frozen the bank account as the accounts have not been filed

Now, I can understand if my client (ltd) owed some tax (PAYE) which they do but does HMRC have powers to freeze bank account based on not filing the accounts ?  I find this hard to believe they would do this especially at these difficult times and have more pressing matters to deal with.  My client has been trading for a few years and made losses.  Though the accounts are overdue by 3 months only.  HMRC did file an objection for striking off the company.  Accounts have not been filed as my client has no money.

Any thoughts ?

Replies (38)

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By Duggimon
10th Jun 2021 11:04

I think someone has gotten their wires crossed somewhere. HMRC are not interested in the filing of accounts, they get tax returns, Companies House administer the filing/late filing/non filing of accounts. I've never heard of HMRC requesting a bank account be frozen either.

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Replying to Duggimon:
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By sanjay100
10th Jun 2021 11:13

Yes thats' what I thought. HMRC does have powers to freeze bank accounts if they think there is tax evasion.

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By Leywood
10th Jun 2021 11:07

Staff telling porkies.

Bank re-acted to strike off notification is more likely.

Did he get a BBL?

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Replying to Leywood:
By Duggimon
10th Jun 2021 11:22

I would guess this is closer to the answer, far more likely the sequence of events was Companies House starting the strike off action for non-filing, and the bank getting wind of it and freezing the account.

The client then reports back to you the account has been frozen as a result of not filing accounts, and either by him or the bank, HMRC get inserted in somewhere.

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Replying to Leywood:
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By sanjay100
10th Jun 2021 12:20

Yes he did get a BBL but did use the money in the business. Maybe clutching at straws possibly maybe something to with the BBL

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Replying to sanjay100:
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By Leywood
10th Jun 2021 12:31

Ltd owes the bank, strike off notice appears at co house, Bank will aboslutely freeze the account. They will have objected to the strike off too.

Could be HMRC issue as well from what others have said.

If client has recevied nothing, its worth checking your agent account to ensure it shows the correct address, could be HMRC have written to an old one otherwise.

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Melchett
By thestudyman
10th Jun 2021 11:08

Could be the client is taking porkies.

Do you know if your client has any transactions of a personal or unusual nature going through the bank account? Which could lead to the bank freezing the account.

Not surprised HMRC would object to non-filing of accounts but definitely would be surprised if they have ordered the account to be frozen (I'm not sure they even have the power to do that...)

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By Paul Crowley
10th Jun 2021 11:21

Money laundering and suspicious activity would be my guess.
Ask for some bank statements.
Bank should not be tipping off so HMRC may be the default obfuscation.

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By sanjay100
10th Jun 2021 11:29

Client spoke to the bank again today and again said they said its due to not filing the accounts.

Which HMRC department can I refer him to ?

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David Winch
By David Winch
10th Jun 2021 11:36

A bank account may be frozen (1) by the bank itself where it suspects money laundering and is considering making a Suspicious Activity Report to the National Crime Agency, or (2) by HMRC (or the police) obtaining an order in the Magistrates' Court where funds in the account are suspected to be 'recoverable property' (i.e. proceeds of crime) or monies intended to be used in a crime.
In this context tax evasion is of course an example of crime.
If you want to look it up see s303Z1 Proceeds of Crime Act 2002.
HMRC are using account freezing orders more these days in relation to suspected tax evasion. If HMRC have obtained an account freezing order in the Mags they will send the account holder a copy pretty sharpish (within 72 hours I would expect). There will be contact details of the person at HMRC dealing with it. Typically the freeze is initially for 6 months to allow time for investigation. He then needs legal advice. Obviously any accounts & returns submitted subsequently need to 'add up'.
David

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Replying to davidwinch:
Kitten
By Hazel Accounts
10th Jun 2021 11:54

Very intersting reply, thank-you.
Presumably misuse of a BBL/CIBLS or wrongful CJRS or other grant claims are potentially crimes and so if suspected could lead to bank account being frozen?

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Replying to Hazel Accounts:
David Winch
By David Winch
10th Jun 2021 12:04

Yes.

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Replying to davidwinch:
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By sanjay100
10th Jun 2021 12:28

After Freezing bank account, wouldn't HMRC send a letter to the client explaining the reasons ? Is there anyone my client can speak to at HMRC ?

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Replying to davidwinch:
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By Leywood
10th Jun 2021 12:32

Thanks David. Always interesting to read your posts.

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Replying to davidwinch:
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By RayM55
14th Jun 2021 10:54

Excellent, but equally, if HMRC did freeze the account, it is inconceivable that the company directors would not, by this time, be aware of that action.

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By Paul Crowley
10th Jun 2021 12:46

If client has no money then what exactly is the urgent issue?
Client was quite happy to let the company be struck off for failure to file.

Client would probably be best to keep his head down and answer no questions without proper paid for advice.

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Replying to Paul Crowley:
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By sanjay100
10th Jun 2021 13:46

Client wasn't happy for the company to be struck off. He does have some money now to pay for his accounts to be done so needs access to his bank account. Yes their is an ulterior motive as well.

I may even in future warn clients that if they do not file their accounts on time , their bank account could be frozen ( (perhaps not strictly true) !! It may expedite certain clients to get their accounts filed on time.

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Replying to sanjay100:
Stepurhan
By stepurhan
10th Jun 2021 14:51

If your client wasn't happy for the company to be struck off, how did it get to the position you described?

Quote:
Though the accounts are overdue by 3 months only. HMRC did file an objection for striking off the company.

A company has 9 months from the year end to file. 3 months "only" is therefore 12 months after the year end (that is even without considering if the 3 month Covid extension applied, which would make it 15 months). Why have accounts not been done?

For there to be striking off for HMRC to object to, either your client applied (which is a whole different set of issues) or they ignored the letters Companies House would have sent if CH initiated proceedings.

Your client is not a poor innocent in this. They have either acted badly or very carelessly to reach this point. As a qualified individual, superior to unqualifieds per a question you raised, should you not be distancing yourself from this behaviour?

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Replying to stepurhan:
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By sanjay100
10th Jun 2021 15:07

Behaviour has been fine but unfortunately they have not been in a position to pay until now. Pandemic caused havoc in their business and had to close down for a while. Companies house had applied for strike off.

I am not one to run away from someone that is having financial difficulties irrespective of their financial position especially during the past one year. I will continue to support people and their businesses to a degree in their hour of need.

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Replying to stepurhan:
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By sanjay100
10th Jun 2021 15:07

Behaviour has been fine but unfortunately they have not been in a position to pay until now. Pandemic caused havoc in their business and had to close down for a while. Companies house had applied for strike off.

I am not one to run away from someone that is having financial difficulties irrespective of their financial position especially during the past one year. I will continue to support people and their businesses to a degree in their hour of need.

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Replying to sanjay100:
Stepurhan
By stepurhan
10th Jun 2021 17:04

Behaviour hasn't been fine from either of you, because it has been allowed to get to this position. You haven't really supported him, since you haven't done anything until you knew you would be paid for it. Instead you have knowingly let him get into greater difficulties.

Indeed, ignoring your unproven HMRC angle, you should have seen this coming. Bank accounts usually get frozen when companies are being struck off. Add in the loan that they took out (legitimate under BBL rules but dodgy as heck for a company that had yet to make profits to "bounce-back" to) and it is hardly surprising for the bank to take action. Why on earth did you not advise paying you from outside the company and adjusting through director's loan?

I would be interested as to what the ulterior motive for keeping this company going is (striking off being easier and cheaper), but I presume you won't tell.

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Replying to stepurhan:
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By sanjay100
10th Jun 2021 18:31

I really do not know what you are trying to insinuate. The difficulties was the Pandemic and once it gets to the survival stage unfortunately accounts become secondary. We have supported them in many ways without charge but it is not worth explaining to someone who is intent of being argumentative. I would imagine if any of your client was in trouble even in Pandemic you would simply disengage.

"I should have seen it coming" Really I should have taken a look into my Crystal Ball.

When companies are stuck off - Bank Accounts get closed not frozen. The company hasn't been struck off as I pointed out earlier and David has kindly explained the circumstances when a bank account may be frozen. None of the conditions apply here.

Directors keep a business going as they believe in the business that the tide will turn. There are signs that the business is picking up now.

Director has invested a lot of his own personal money as well. The bounceback loan the company took was only small and met the BBL criteria. Unlike some they didn't took more than they were entitled to.

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Replying to sanjay100:
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By Leywood
10th Jun 2021 18:59

sanjay100 wrote:

When companies are stuck off - Bank Accounts get closed not frozen. The company hasn't been struck off as I pointed out earlier and David has kindly explained the circumstances when a bank account may be frozen. None of the conditions apply here.

-

Naive comment?
Company has not been struck off yet. So Bank not closed. Just frozen (you said).

< The bounceback loan the company took was only small and met the BBL criteria. Unlike some they didn't took more than they were entitled to.

Just because they met the criteria for a loan does not mean they can walk away from their responsibilities. You are sounding as if you think that is ok (wrongly perhaps, but thats how its coming across)

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Replying to Leywood:
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By sanjay100
10th Jun 2021 19:52

Not at all. They do not want to close down the business. They haven't used the BBL to themselves a dividend or used the money as a deposit for a house purchase

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Replying to sanjay100:
Stepurhan
By stepurhan
11th Jun 2021 09:23

You didn't need a crystal ball. The accounts are over 3 months late. The bank has a loan outstanding. Any accountant would know that the bank account was at risk, especially if you knew the striking off was happening, which seems likely but is hard to tell from your posts.

The company was historically loss-making. It was not making statutory filings. It had a BBl. Are you really not understanding how bad that looks to the outside world?

I have not abandoned clients during the pandemic. I have also not let them dig themselves bigger holes. If both businesses were suffering from the pandemic, then closing the loss-making business to concentrate on the other was the best advice. Keeping both open and missing a vital statutory deadline as a result clearly wasn't. Continuing to do so 3 months later looks very bad for all concerned. I hope you outlined the risks of this clearly to your client in writing.

You are making excuses and dismissing anyone pointing out the failures, of both you and your client, as "argumentative". This is not a good look for your "qualifieds are more responsible" assertion.

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Replying to sanjay100:
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By Paul Crowley
12th Jun 2021 12:54

If directors owed money by company directors can object to the striking off as they are creditors.
If company cannot pay its liabilities as they fall due then they are required to take some action as the company is insolvent.

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Replying to stepurhan:
David Ross
By davidross
14th Jun 2021 10:51

HARSH !

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Replying to davidross:
Stepurhan
By stepurhan
14th Jun 2021 12:21

davidross wrote:

HARSH !

Is it, or is it simply pointing out the facts to someone that appears to not want to face them?

Do you disagree with anything I have said? Simply criticising my tone isn't really adding anything to the discussion.

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Replying to Paul Crowley:
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By Rgab1947
14th Jun 2021 11:00

Yes that struck me as odd. No money but client worried about bank account being frozen?

Not convinced HMRC is involved. More like bank acting arbitarily . A notice to wind up would put the wind up them. 3 months is normally when CH reacts with a winding up order.

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By wingman22
10th Jun 2021 14:30

Sanjay – a couple of questions:

- Why have the accounts not been filed? You say the client has no money – if you are the accountant (assumption) have these been prepared and are you withholding them pending payment as you only mention filing them?
- How have the losses to date been funded?
- Where do you get these clients from?

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Replying to wingman22:
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By sanjay100
10th Jun 2021 15:10

I have not started the work on the accounts. I am still trying to help them by posting a question here for a start.

Director has funded the losses from his other business which is profitable and bounce back loans. There is a lot more one can add.

Long and interesting story how I got this client maybe one for another day.

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Replying to sanjay100:
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By Paul Crowley
10th Jun 2021 17:43

Sanjay
This does not read well

OTHER PROFITABLE BUSINESS
This looks like your client was wanting the strike off and Bounce back loan to disappear.
Not his fault, Companies House did it!

Sounds as if freezing the bank account wholly justified.

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Replying to Paul Crowley:
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By Leywood
10th Jun 2021 18:07

[quote=Paul Crowley]

Sanjay
''This does not read well''

especially from a regulated qualified by exams man.

Behaviour from company has been far from fine. Why did they not submit conf statement? Why did you at least not prompt them to do this. Why have they buried their head in the sand?

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Replying to Leywood:
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By sanjay100
10th Jun 2021 18:25

Of course it was mentioned but there is much more than meets the eye. I wasn't going to abandoned them

A lot of companies leave their accounts to the last minute unfortunately lockdown and then trying to start to trade becomes a priority.

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Replying to Leywood:
panda ketteringUK
By ketteringUK
10th Jun 2021 19:37

It reminds me of some of the old dragons den episodes.
'Gimme the money even that I have other business that can underwrite or pay the other company's liability'

I'm pleased that someone objected to the striking off process. I hope that self employed builders will have similar level of scrutiny by HMRC. It's been so frustrating seeing this huge abuse of the seiss grants.
As for Sanjay - something does not add up. 12 months is plenty to prepare a basic set of accounts. And if the director has more successful business then he could pay you. If not, you could do quick frs105 on the back of the [***], free of charge, just to avoid the client having more stress. It only takes few hours to do cash rec and establish balance sheet.

We'd probably disengage and sar such client by now. PITA and not worth the hustle.

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Replying to ketteringUK:
panda ketteringUK
By ketteringUK
10th Jun 2021 19:39

**** refers to slang word for cigarettes. Nothing sinister here.

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Replying to ketteringUK:
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By sanjay100
10th Jun 2021 20:08

Don't get me started with SEISS and bounceback loans. I have heard and seen enough business taking the cash and using it for illicit purposes

The profits on the other company was utilised so they could just carry on.

The accounts are not straight forward either and will take time. Director is stressed trying to manage everything.

I am not sure why you think a SAR would be necessary as they are not evading tax and used the bounceback loan for the business operational needs. All thats happened is their accounts are late which isn't that uncommon especially at these difficult times.

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By tom123
11th Jun 2021 09:35

I am a little confused, however, that the accounts are late and you haven't already started them?

Was it a very late instruction?

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