Which is the best way to close my ltd company?

No money left and need to shut down, but what about BBL debt and tax?

Didn't find your answer?

I have a Ltd company and am the sole director / emplyer. I have not had an income since May 2020 and have been living on the bounce back loan which is due to run dry end of April. After that I will need to leave the country and move in with my brother. 

The company has no other debts and no assets although Im expected to make a tax return end of April (for the period April 2019-2020)

An accountant friend said that since the company hadnt traded for nearly a year it would be considered 'dormant' and to have it struck off. However, I understand that I need to do some final accounts first and I am wondering if I can do them for 24 months? That way I can balance off any income from year 1 with the losses and zero income for year 2. I literally cannot afford any payment and also my accountants fees (hence me trying to do it myself) 

My other question is about timing. I know if I dont send in a tax return end April there may be a penalty (or, does the penalty start from Jan 2021 which is 9 months after the tax period?) but I would prefer to wait until the account is at zero and also to see if any money I am owed comes in in May. Id rather not do tax returns just for year 1 (2019-2020) as the liability will be much higher than if I could include 2021 in the return. 

Is another option to simply proceed with strike off and wait and see if they ask for reinstatement? (I know that is a dodgy question but I am feeling desperate) How long does it take HMRC to respond and demand reinstatement and will they bother with a company with no assests etc? It might buy me more time to get any cash together. The same accountant friend said if there is no return filed, it will not register but I have read up that that is a criminal offence too. 

The reason I am keen to pack up and leave is that I have the long-covid and spend most of my time sleeping and have severe joint pain etc. I need to recuperate in my family home where I dont pay rent and can be helped. However, the minute myself and the economy are better I would like to return to the UK and do not want to ruin my credit rating for the future. 

Replies (60)

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By Paul Crowley
27th Mar 2021 22:49

Was all the money you took out of the company salary, and have you paid the PAYE tax?

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By colinsw
28th Mar 2021 09:42

Yes, I have paid the PAYE tax and contributions. I have not designated the money salary or not, it could be assigned "salary" when I put together the accounts. I drew the money from the company with a combination of transfers to my personal account (never more than 500 at a time) and direct purchases from fuel stations, supermarkets, insurance companies etc.

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Replying to colinsw:
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By Paul Crowley
28th Mar 2021 18:30

So it could really be the problem that company is not really insolvent as it is owed a lot of money by you
Currently you owe all the money to the company
And clearly the payments are not dividends

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Replying to Paul Crowley:
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By colinsw
29th Mar 2021 08:33

Hi Paul, yes exactly, and sadly. I wasnt able to furlough myself because I had paid PAYE annually instead of monthly according to my accountant. So, I only had the BBL to live on.
What would be my options? How to get out of this mess? I am owed money by clients from last year but I think they are in the same boat and I may never see that cash and currently Ive no work in the pipeline (I was in the festivals/events industry)

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boxfile
By spilly
28th Mar 2021 09:58

No, you cannot do accounts for 24 months, but they can be for longer than a 12 month period. Company tax returns can only be done for periods of up to 12 months max for submission to HMRC so if the accounts cover a longer period, you may need to do more than one.
Are you sure you cannot find the funds for an accountant? It could save you a whole heap of aggro and worry.

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By colinsw
28th Mar 2021 10:01

Thanks for that. Yes, I think I need to. I had an accountant for years but discovered he was charging me a lot more than my colleagues who work as lone directors. I was paying approx 2500 per year all in and I am not registered for VAT either. I need to find someone else. My accountant was also very old school - not letting me put through certain expenses which my colleagues do use against tax. etc

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Replying to colinsw:
boxfile
By spilly
28th Mar 2021 10:16

Old school does not mean that your previous accountant was wrong in disallowing some of your expenses. Expenses should be incurred for business reasons only, and it may be that your colleagues are either over-claiming, or that their accountants are less diligent in weeding out personal items.
You might be able to agree a fixed fee with a new accountant so that they sort out everything for the 2 years.

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By Hugo Fair
28th Mar 2021 12:11

I "have been living on the bounce back loan which is due to run dry end of April. After that I will need to leave the country and move in with my brother."
... so presumably your company has made no repayments of the BBL (which as the name indicates was a loan not a grant)?

"The company has .. no assets" but "since the company hadn't traded for nearly a year it would be considered 'dormant' and to have it struck off."
... has your 'accountant friend' explained to you the process (and personal liabilities) of taking that action?

These are likely to be more pertinent questions than whether or not you should file your accounts for various periods - and you definitely need to speak to an accountant (or possibly an insolvency practitioner) urgently.

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By legerman
28th Mar 2021 12:13

Beware that if any of the BBL you've taken hasn't been declared as salary, it will be personally owed by the Director and classed as an asset. You won't be able to strike off the Company if total assets are similar or more than the cost of appointing a liquidator.

You still have a few days to do something about that before the end of the tax year.

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Replying to legerman:
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By colinsw
28th Mar 2021 12:37

Thanks for this. I think the personal tax return I did for last year would apply to the first BBL which was then topped up in Dec. I could assign the top-up as a salary. I wonder how much an insolvency practitioner charges? I have no assets as I did consultancy work

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Replying to colinsw:
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By legerman
28th Mar 2021 13:17

Quote:

Thanks for this. I think the personal tax return I did for last year would apply to the first BBL which was then topped up in Dec. I could assign the top-up as a salary. I wonder how much an insolvency practitioner charges? I have no assets as I did consultancy work

An insolvency practitioner will charge anything from 6k upwards (might be more now) Depending on the size of the BBL you have scope for putting through a fair bit as PAYE as long as it's before 5th April.

Not sure what you mean by being dealt with in last years tax return as they weren't available until May, so would only impact on paye in 20/21

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Replying to legerman:
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By colinsw
28th Mar 2021 15:34

6k is hefty for anyone basically bankrupt. There must be many others like me who cant afford to go in any direction with this or pay household bills.

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panda ketteringUK
By ketteringUK
28th Mar 2021 15:45

Why won't you ask your colleagues about the details of their wonderful accountant and see if he or she will help you for just a fraction of fees you have been charged previously.

As things are, you're not allowed to file ds01 and apply for striking off without dealing with the lender first.

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By timothyvogel
29th Mar 2021 08:43

Also, I strongly advise you yu get some professional advice. I am scared by the suggestion that you could put the Bounce Bank loan through as salary for last year. you need to do that when it was paid, not after the event. You will also then have a larger debt to HMRC. The issue of trading while insolvent has not gone away just because we are in lockdown, and certainly any liquidator would have to consider if the payments were at a preference. Both leave you liable to serious problems.
Closing it down as you originally suggested is not an option while the BBL remains unpaid and HMRC are owed money.

Basically, you are a casualty of Covid but do not risk making it worse. You need professional advice but if you ignore it eventually a liquidator will be appointed by someone. You need to make sure you do nothing to put your position more at risk, and that means some advice at some stage.

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By bernard michael
29th Mar 2021 09:24

You state that the company has no assets yet you also state that you are waiting for "money to come in" and " waiting for money owed from last year" Aren't those debts assets ??

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Replying to bernard michael:
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By colinsw
29th Mar 2021 09:32

I am not sure - perhaps they can be classified as assets but I was thinking of property, equipment etc. I am in the events industry and some clients owe me money from last year which I doubt Ill see again. They are in the same boat .
If I can classify those monies owed to me as assets, does it help my case?

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Replying to colinsw:
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By Paul Crowley
29th Mar 2021 09:57

Not really
You still borrowed money from the company and need to repay it
The debts owed to you are probably by now bad debts anyway.

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Replying to colinsw:
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By bernard michael
29th Mar 2021 10:01

They are classified as assets unless they are definitely a write off, in which case you're not "waiting for the money to come in" because it won't.
What is the value of the difference between the company assets ( inc the debtors) and the liabilities ( inc the loan) ??
If you give this figure it might prevent a lot of wasted time

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Replying to bernard michael:
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By colinsw
29th Mar 2021 10:09

Hi Bernard, thanks for your patience as I dont have any accountancy background.
So, the money I am owed is around 5k and the BBL (which is my only debt except for tax) was 19k

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Replying to colinsw:
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By bernard michael
29th Mar 2021 10:26

Quote:

Hi Bernard, thanks for your patience as I dont have any accountancy background.
So, the money I am owed is around 5k and the BBL (which is my only debt except for tax) was 19k


If you have taken the BBL you now have a debt owed to the company, which is also an asset unless you declare it as salary. However if you declare it as salary you personally owe HMRC tax /NIC. Take up AWOL's suggestion ASAP or ask your local community if there is an accountant who'll look at the problem and give definitive advice probably for a small fee/pro bono, which will enable you to sleep peacefully
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By Mr_awol
29th Mar 2021 10:12

*This comment has been moderated.*

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Replying to Mr_awol:
Lone Wolf
By Lone_Wolf
29th Mar 2021 10:29

Lol

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Replying to Mr_awol:
Red Leader
By Red Leader
29th Mar 2021 10:35

A bit cruel, perhaps.

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Replying to Red Leader:
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By Mr_awol
29th Mar 2021 10:53

Perhaps. I nearly edited it.

But then i re-read the post and realised that the OP hasn't worked since May 2020 but has taken a BBL through the company to cover his own personal income needs, which he hasn't put through the payroll but is willing to 'classify' as whatever makes life easiest for him to spend the rest of the BBL and any remaining debtor balances (if possible) before closing the company and leaving the country. Meanwhile Rishi doesn't get the tax that should have been paid ages ago and also has to pay the BBL off. When i say Rishi, obviously i mean 'us'.

All because the OP helped himself to his own made-up unofficial combination furlough/SEISS grant.

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Replying to Mr_awol:
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By cathygrimmer
29th Mar 2021 12:28

If the official furlough scheme/SEISS grant had been fair, he wouldn't have needed to!

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Replying to cathygrimmer:
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By Mr_awol
30th Mar 2021 09:46

Quote:

If the official furlough scheme/SEISS grant had been fair, he wouldn't have needed to!

The SEISS grants and furlough provisions were not only fair, but very generous, i would say (particularly the SEISS scheme)

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Replying to Mr_awol:
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By cathygrimmer
30th Mar 2021 10:58

If you qualified they were fair and, in my opinion, the SEISS scheme was far too generous for some, being unconnected with actual loss. The lack of fairness came in the qualification criteria. If you haven't heard of ExcludedUK, I suggest you look them up.

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Replying to Mr_awol:
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By legerman
29th Mar 2021 13:33

Quote:

Perhaps. I nearly edited it.

But then i re-read the post and realised that the OP hasn't worked since May 2020 but has taken a BBL through the company to cover his own personal income needs, which he hasn't put through the payroll but is willing to 'classify' as whatever makes life easiest for him to spend the rest of the BBL and any remaining debtor balances (if possible) before closing the company and leaving the country. Meanwhile Rishi doesn't get the tax that should have been paid ages ago and also has to pay the BBL off. When i say Rishi, obviously i mean 'us'.

All because the OP helped himself to his own made-up unofficial combination furlough/SEISS grant.

Getting a BBL in May last year when everyone thought life was getting back to normal and presumably the OP thought he was going to be back at work in a few months is hardly [***] the system. The hospitality industry has suffered the most during the pandemic, and a lot of Companies have (or will) gone to the wall.

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Replying to legerman:
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By Mr_awol
30th Mar 2021 10:04

Absolutely. Nothing wrong with applying for the loan to keep the business ticking over/viable

Borrowing through a company specifically to then 'borrow' that money is a little ify, but with full intention to repay is reasonable I'd say.

Based upon his comments at the time, however, the OP did say that they topped the loan up in December, and has some of it left which he intends to spank on personal expenditure for another month before skipping town with no intention of paying it back. Subsequent comments claim to have spent a good chunk of the dosh on website, rent, etc but given other comments made by the OP cast a certain level of doubt over how much is likely to have been spent on such things.

Overall, whilst i don't think the OP is the spawn of Satan, i wouldn't ask him to hold my wallet whist i tie my shoelace

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Replying to Mr_awol:
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By colinsw
30th Mar 2021 10:31

"spank personal expenditure" is a reach. In the past I claimed personal expenses for my home office in the spare room around 25% of the rental and half my wifi bill, which after I lost all income turned into 100% of the rental and all of the wifi bill. Recently I also moved in with friends to further save money, and have not bought a book, shoes or one single luxury and am living on a couple of hundred pounds a month. I asked you before what you have done in my situation?

Its easy to demonise and heckle from the sidelines at those of us who werent able to furlough and create victims of the crown but if they had followed NZ or Aus example we would not be in this mess with huge death toll. Cheltenham, football games etc were being given the green light to become super-spreader events and with 50 billion "spanked" on the most expensive and inept app ever built, I would say I am not the problem here. The real thieves are very much richer and politically connected than me and the other 3 million directors left out of the furlough scheme

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Replying to colinsw:
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By bernard michael
30th Mar 2021 12:36

Quote:

"spank personal expenditure" is a reach. In the past I claimed personal expenses for my home office in the spare room around 25% of the rental and half my wifi bill, which after I lost all income turned into 100% of the rental and all of the wifi bill. Recently I also moved in with friends to further save money, and have not bought a book, shoes or one single luxury and am living on a couple of hundred pounds a month. I asked you before what you have done in my situation?

Its easy to demonise and heckle from the sidelines at those of us who werent able to furlough and create victims of the crown but if they had followed NZ or Aus example we would not be in this mess with huge death toll. Cheltenham, football games etc were being given the green light to become super-spreader events and with 50 billion "spanked" on the most expensive and inept app ever built, I would say I am not the problem here. The real thieves are very much richer and politically connected than me and the other 3 million directors left out of the furlough scheme


I never was very good at maths, which is why I became a research chemist before qualifying as an accountant. However " a couple of hundred pounds a month" doesn't seem to equate with the BBL loan of £19k. If that's all you spent what has the rest been spent on (the plot seems to gets thicker)
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Replying to Mr_awol:
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By colinsw
29th Mar 2021 10:45

The Covid crime-stoppers hotline? Ok, yes I know this isnt an ideal situation and I hate how this has worked out, but please advise me on how you would have done things differently with zero income or government support? I literally had nothing else to live on. Much of the loan went to building a new website, paying for premises rental etc but also my petrol and food

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Replying to colinsw:
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By bernard michael
29th Mar 2021 10:57

Quote:

The Covid crime-stoppers hotline? Ok, yes I know this isnt an ideal situation and I hate how this has worked out, but please advise me on how you would have done things differently with zero income or government support? I literally had nothing else to live on. Much of the loan went to building a new website, paying for premises rental etc but also my petrol and food


Why didn't you say this in your question rather than implying you took all the BBL for yourself
How large was the BBL??
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Replying to bernard michael:
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By colinsw
29th Mar 2021 11:12

The BBL was 19k

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Replying to colinsw:
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By bernard michael
29th Mar 2021 11:27

Quote:

The BBL was 19k

The question I should have added is how much of the £19k BBL have you taken for personal reasons as you claim to have spent a lot on maintaining the company

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Replying to colinsw:
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By Paul Crowley
29th Mar 2021 11:00

Claim universal credit

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Replying to Mr_awol:
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By cathygrimmer
29th Mar 2021 10:50

How nasty. I'm guessing you haven't been impacted by lockdown or affected by Covid. What I see here is someone struggling to survive financially because of the government's grossly unfair rules which exclude people from being helped whilst simultaneously preventing them from earning a living. What did the government think these people would do with a bounce back loan when it put them in this desperate financial situation?

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By Matrix
29th Mar 2021 10:37

Don’t engage an accountant if you can’t afford to pay them. I would contact an insolvency practitioner, they must get these questions every day at the moment.

There will be loads of others like you. I assume you claimed furlough but there was limited support for owner managed businesses operating through companies. There will be others who lived off the BBL and the government certainly encouraged excluded businesses to get them.

I have a client who also operates through a limited company in the events industry and has been hit really hard too (but no BBL).

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Replying to Matrix:
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By colinsw
29th Mar 2021 10:48

Thanks so much for showing some understanding. No I was unable to furlough myself as I was paying paye annually instead of monthly payroll, or some such technicality

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Replying to Matrix:
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By colinsw
29th Mar 2021 10:48

Thanks so much for showing some understanding. No I was unable to furlough myself as I was paying paye annually instead of monthly payroll, or some such technicality

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Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
29th Mar 2021 10:44

Okay there is quite a lot to unpick here.

As I understand it:

The Company is insolvent.

You are a debtor for the DLA you withdrew.

The Bank is the (sole?) creditor for the BBL.

If you attempt to dissolve the Company there is a high chance that HMRC and the Bank will object. HMRC will object if the Company has outstanding returns and/or if there is a DLA they want to see a Liquidator try to recover.

There is also a chance that HMRC or the Bank will Liquidate the Company.

In the past, Banks would seldom do this as they preferred to avoid negative PR however now they may well have to, in order to be able to recoup the BBL back from the government.

As it stands, the government will currently not pay out under its guarantee unless the Bank has extinguished all recovery methods, to include Liquidation.

Unless this changes, I expect to see a shift in the Bank's attitudes as they will be forced to Liquidate to recover a large proportion of the loans.

If the company is Liquidated, either compulsorily, or voluntary, the Liquidator will:

A) Pursue you for repayment of the BBL
b) Investigate whether there has been an abuse of the BBL for which you can be held personally responsible.

Your choices seem to me to be:

1. Repay the DLA and the Company can use the funds to pay some/all of the BBL.

2. Do nothing (not recommended) - either the Company will be Liquidated or eventually it will be struck off by Companies House for non filing of statutory returns.

The Company might then be reinstated and put you back to square one again.

3. Attempt to dissolve the Company yourself (not recommended due to the DLA)- see 1 above.

Here is a link to dissolution:

https://www.gov.uk/strike-off-your-company-from-companies-register

4. Liquidate the Company yourself. You can do this through the Court or through an Insolvency Practitioner. You can use some of the DLA repayments to cover the costs.

Thanks (2)
Replying to Insolvency Practitioner:
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By wingman22
29th Mar 2021 10:59

A JIEB question perfectly answered.

Although we don’t know the sums involved in reality it is considered unlikely that anything will happen in the near future. No stat demand or winding up petition can be issued for a while so unless the OP starts Liquidation proceedings themselves they have three months at least to leave the country. No independent IP would be willing to start overseas investigations and the OR simply would not have the resources.

Pack your bags and thank the UK taxpayers for paying for your flight.

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Replying to wingman22:
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By Paul Crowley
29th Mar 2021 11:02

But OP intends to come back

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Replying to Insolvency Practitioner:
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By I'msorryIhaven'taclue
29th Mar 2021 11:03

Quote:

If the company is Liquidated, either compulsorily, or voluntary, the Liquidator will:

A) Pursue you for repayment of the BBL
b) Investigate whether there has been an abuse of the BBL for which you can be held personally responsible.

Hi IP,

How likely is a liquidator to pursue a director for repayment of a BBL in the event of there having been no abuse of that BBL?

I ask because I know a number of directors who are currently chowing their way through their BBLs on what I suppose we would class as legitimate expenses: they're locked down, running at a loss, but still meeting their overheads. Their own directors' salaries are, to a greater extent, covered by furlough pay.

I don't believe any of them imagine they'll ever have a liquidator chase them personally for unpaid BBLs.

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Replying to I'msorryIhaven'taclue:
Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
29th Mar 2021 11:19

My mistake, I meant to put DLA, not BBL! Too many acronyms...

A Liquidator will look to:

Report Misuse of Covid funds to HMRC and Insolvency Services

HMRC can:

Charge a 100% tax penalty
Charge 100% interest in top of the penalty

Insolvency Services can:

Disqualify
Fine
Bring civil and/or criminal proceedings against the Directors

Liquidators can also:

Pursue for DLA
Bring proceedings for misconduct/pursue for payment relating to misconduct

Of course, if there has not been any abuse then there is nothing to worry about.

Key points to look at are:

Was the original application fraudulent (i.e was the Company not already in difficulty as at 31.12.19 and did the Company really suffer as a result of Covid)

and

Did the Director use the BBL funds for personal use.

Thanks (1)
Replying to Insolvency Practitioner:
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By colinsw
29th Mar 2021 11:06

Ah thanks so much for taking the time to reply and give me some options

I dont know what 'DLA' means but I think its simply the loan

Regardless of when I liquidate the company (myself or forced by bank) I dont have the personal means to repay or start making repayments. It might take 6 months before I am well and back in the UK and the industry is back on track.

I might have to ask to defer repayment until 2022, and ditto HMRC. Ill need to inform them that I cannot make the repayments. And then there is the IP fee too. Even reinstating the company if I dissolve it now, I may not have the income if its reinstated too soon.

If they need to get their money out sooner I may have to declare personal bankruptcy which will be dreadful for my future back in the UK, but its an option.

I was chatting to someone last night who said they applied for directors redundancy and used that money to pay the IP and some of the debts. But I don't know anything about that - is that viable?

Thanks again.

Thanks (1)
Replying to colinsw:
Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
29th Mar 2021 11:21

The Redundancy Payment Office will offset any redundancy payments due to you against the overdrawn Director Loan Account ("DLA")

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Replying to Insolvency Practitioner:
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By colinsw
29th Mar 2021 18:27

Hi there IP
Can I ask you if I can do the insolvency from my home country? I have been reading online and it seems we can start proceedings outside of the EU/ Denmark provided the UK is still my main domicile. Is this your understanding?

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Replying to colinsw:
Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
30th Mar 2021 09:21

Yes you will need to Liquidate the Company in the UK, assuming its a UK registered Company.

If you are talking about personal Bankruptcy that is more complicated.

Please clarify.

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Replying to Insolvency Practitioner:
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By colinsw
30th Mar 2021 09:57

Yes it is UK registered and its the company I'm referring to, not personal. I intend to remain domicile in the UK and wouldnt change anything over the long term (only for a few months) but I am literally unable to pay any more rental now and have been living with friends for too long. I moved out of my apartment months ago to save money. Nowadays everyone is working remotely so I wondered. Do they usually require face to face meetings?

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