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Striking off insolvent Ltd Co which never traded

Client opened a Limited Company as if it was a game you never need to play again.

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I got a new client this week who is a VAT registered van courier (sole trader). When he was giving me his shoe box with all the receipts for the last year, he has also given me a different folder informing of an additional Limited Company he created in June 2020. 

The client thought of starting a business through a Limited Company importing products from China and selling them on Facebook. He didn't consult an accountant and opened a Limited Company, registered it for VAT, for PAYE, CT...and never did anything else! He never traded at all. He didn't even open a business bank account. He didnt even activate PAYE Code on Government Gateway.

VAT:

For the last year, he has been receiving letters of assessments for VAT stating he had not submitted the returns. He did not read the wording of the letters, but he paid the amounts that HMRC was assessing on the letter, still without submitting a VAT return. He has paid a total of £269 on VAT assessments. 

PAYE:

He has received this month a letter of DM PAYE showing a Statement of Liabilities for PAYE Specified charges of the last 6 months which states the company owes a total of £539.40.

I have only been an accountant for less than a year and I don't take jobs I don't feel competent for. However I think this is a simple one with a bit of guidance. Correct me if you think otherwise, please. 

a) If I inform HMRC that the company has never traded, could the VAT payments be recovered? Yesterday I submitted the last 5 VAT returns at £0 and deregistered the company for VAT as of 27th of July 2021.

b) If I inform HMRC there have not been employees, would they strip out the £539.40 PAYE debt?

c) Assuming they don't strip out the debt, is it possible to strike off the company if the only debtor is HMRC? I am aware striking-off is only permitted for solvent companies but I never striked off a company which is insolvent just with a small debt with HMRC. 

d) The courier asked me if closing could affect his personal credit rating. I believe that given there are no third party lenders involved, the debt with HMRC would not affect him personally. But I have my doubts, as he acted negligently as a director. 

Any advice out of my questions would be helpful too.

Thank you.

Replies (6)

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By rmillaree
29th Jul 2021 10:34

Welcome to the world of set it all up in one go for £15 with no money laundering checks needed - not sure why companies house dont have to follow the same rules as everyone else in that regard.

Vat will end up at nil liability at worst so anything poaid should be refundable.

b) hopefully perhaps they will cancel scheme if there was never any reporting obligation. If they wont cancel then seek advise on earliest date that can be used to close scheme. Not excatly my area this. submitting nil submisions will clear estimated liabiloty generated and simply leave any penalties charged whcih may be appealable (is that a word?)

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By Richard Grant
29th Jul 2021 10:52

Without a company bank account it may be very hard to get the money paid back.

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Replying to Richard Grant:
seneca
By Seneca
29th Jul 2021 12:28

Good point as he paid from his personal bank account. Thank you.

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By ireallyshouldknowthisbut
29th Jul 2021 12:08

I would have told the client my fees for fixing his mess would exceed the VAT rebate, and suggest they wrote all the letters and file a DS01 in an effort to ensure they were never so stupid again.

A regular occurrence however I am afraid, albeit most don't register for PAYE and VAT and then ignore it all like a complete numpty.

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Replying to ireallyshouldknowthisbut:
seneca
By Seneca
29th Jul 2021 12:34

Thank you. For me to learn, if HMRC doesn't condone these debts or raises a further penalty, could the company be struck off without paying those debts? Or should I tell the client to pay whatever HMRC requests for late filings?

By the way, I sent you a private message due to another post you helped me with.

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RLI
By lionofludesch
29th Jul 2021 13:02

My immediate thought would be to ask this client to get a proper job because he's not suited to the world of business.

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