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What advice to a contractor who cant pay his CT?

What is your standard advice?

We seem to have had a few of these lately, contractors who work through a company for a few months and then go back into employment without making provision for the CT.  It always seems that it is us as accountants that are more concerned about them paying the tax than they are and if we dont chase them they would just strike the company off eventually and pay no tax (as I have seen happen a number of times).

So what is your standard advice in this situation, or at least what options do you talk to them about - 

A) just tell them they have to pay the tax

B) tell them to go and see an insolvency practitioner 

C) tell them to strike the company off and it will all go away

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By Matrix
10th Nov 2017 06:36

I first check that I have handled the compliance obligations, so even if accounts have not been prepared, I would prepare accounts just for HMRC and attach these as a PDF to the CT600 and file with HMRC. Then at least HMRC knows there is a liability and can object to any striking off if they wish.

If the client did not want to file this then I expect I would file a SAR but never had this actually. I assume your clients have spent the money so overdrawn DLA. There have been loads of posts on this issue in the last few months.

If they do strike off the company then they would need to let all their creditors know first.

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10th Nov 2017 08:50

i tell 'em to cough up.

It does however highlight why PAYE was bought in in the first place. Tax 'em at a point HMRC can get 'em.

There must be hundreds of thousands of fake self employed workers on low wages who never declare and have no assets of money so there is nothing HMRC can do about it.

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10th Nov 2017 09:08

I have stopped doing lower end contractors for this very reason. They have only ever been in employment so think that everything they get is there wage and save nothing.

After 4 or 5 months they disappear or go back into employment leaving the company in limbo.

If you go on the UK Business forum there is one of these every day. Some on there though are contractors who earn big bucks £100k plus then just do the terrible Spongebob plan to get away with it.

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10th Nov 2017 09:40

A)

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10th Nov 2017 10:09

A

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10th Nov 2017 11:43

Eh?

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to Euan MacLennan
10th Nov 2017 11:58

Are you from Yorkshire?

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to andy.partridge
10th Nov 2017 13:55

Certainly not!

I'm from Singapore.

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10th Nov 2017 12:31

My standard advice is not to post as "Anonymous".

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By dlapish
10th Nov 2017 14:12

First thing is to try and prevent it happening in the first place by explaining how the CT liability will arise and roughly what it will be as a percentage of income. I guess we all do that. When it does happen my standard advice is to have the client call HMRC as soon as the tax return has been filed and see if they will set up a payment plan. It's better to tell HMRC early rather than wait for the threatening letters, and penalties, to arrive.

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10th Nov 2017 14:33

to be fair if any of them have seen the paradise papers they probably consider that whilst this is not 'morally' right legally they can do it....if its good for the 'rich'....

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By NH
10th Nov 2017 15:54

What no one else has said is that while yes A is the ethical option, under certain circumstances, we owe it to the client to send them down the insolvency route. Not that I have taken that option many times, but sometimes it is the way to go.
We dont make the rules we just tell clients about them.
I have always thought the UK tax system is totally bonkers, setup a company, trade for a few months making a shed load of money and have no legal requirement to tell anyone how much you have earned or pay any taxes for nearly 2 years after you start trading.
In other countries you pay tax quarterly from day 1

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By Dib
to NH
10th Nov 2017 16:25

Roll on MTD for companies. :-)

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