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Owing money to Inland Revenue, what happens next? Urgent please!!(24 Posts)
DH has a failing business. He owes a lot to the inland revenue. He has been making small payments when he can but today had a visit from 2 Sheriff Officers telling him he has got 2 weeks to 'sort it out'. This is money that cannot be found in 2 weeks.
What can he do?
What will happen if he cannot pay enough?
This is really scary, please can anyone help?
They will probably issue a winding up petition (if he is a company) or a bankruptcy petition (if he's a sole trader). They are fairly ruthless in their pursuit I'm afraid and a nightmare to negotiate with.
Thank you Susie.
He is a limited company but there is only him in the company as far as I know (he has a few employees). Can they come near our house - can they demand assets from the family home?
A limited company is an entity separate from the director(s).
I'm confused, I don't think there is a director. Anyway we have an appointment to see an accountant on Thurs. Hopefully that will make this a bit clearer.
your dh will be the director.
I can't help with the problem though but hopfully the accountant will be able to
Thanks, it is awful to see a successful business dwindle to nothing.
Surely the HMRC will be just another creditor of the company? Your DH will be Director.
They will take their share of the residual assets first tough and everyone else will be further down the line.
Make sure the business does not trade nsolvently otherwise DH will become liable for any liabilities incurred.
Get to your accountants pronto.
I'm sorry to be clueless but what does that mean "Make sure the business does not trade insolvently otherwise DH will become liable for any liabilities incurred."
can you explain this again to me?
The way I understand the situation DH is paying the bills apart from the Inland Revenue as he cannot afford to.
I thought the government had made extra help available for struggling businesses through the Business Payment Support Service allowing them to defer tax payments?
cathcat - are you sure this is a limited company? This sounds odd:
"The way I understand the situation DH is paying the bills apart from the Inland Revenue as he cannot afford to. "
Is he perhaps personally guaranteeing the liabilities of his limited company? Is he just drip feeding capital in as necessary in order to pay wages, suppliers, etc?
Trading insolvently basically means taking credit from suppliers where there was no "reasonable prospect" of paying the creditor on time. It is just example of the wider danger of wrongful trading
On the HMRC issue if a company continues to trade but does not pay PAYE or VAT bills the Directors can be made personally liable even if the company goes into voluntary liquidation. Owing corporation tax I think is a slightly different matter and not treated the same way although not being able to pay HMRC almst by definition means the company is insolvent.
The link above is an excellent resource for undestanding insolvency if you click around the website.
Okay ABetaDad I have tried to have a read through and it seems to me that the company is (a) insolvent (b) wrongfully trading as it cannot pay its debts (to HMRC).
But the bit about directors being personally liable worries me the most as to me this means that they could take possessions from our house or even take our house?? I am freaking out btw. What about things I own or can't prove I own but bought with my own money? My DS says that the children have rights to residency here but I don't know if that is the case.
help, I don't know how I am going to manage til we see the accountant on Thurs.
Your assets are your assets as long as they have been bought by you with money you earned or were given to you by someone else such as a relative or belonged to say before you married DH. However, if say had DH bought some assets with money from the company and transferred to you recently (recently is a flexible definition) then they could be seized as that might be argued as was an attempt to hide assets from creditors. Big assets such as houses and cars are the kind of thing that creditors woudl prefer to seize but are usually esy to prove ownership of. Smaller assets such as TVs and household goods are less likely to be attractive to them but they can seize any asset in theory as long as it is owned by DH.
If you have not been receiving a wage or dividends from the business or acting as a Director that will also be helpful in keeping yourself out of this matter.
If your DH and you stil have separate financial affairs then do not allow your self to be bullied (by creditors) into agreeing to guarantee or pay off the company debts.
What kind of tax is actually owed?
cathcat - i'm sorry to read this. We are in a similar situation. I don't know your actual details but i just wanted to direct you to the NATIONAL DEBTLINE. They have been my lifeline. They will direct you towards an organisation that will also help out with business debt.
We are paying considerably reduced amounts, for four months and then they will review it. My DP is self employed and there is just him in the "business". We are not a limited company so its scary stuff. They have been understanding so far.
I'm not sure how things work for you, but they advised us to prepare last years tax return early as we earnt considerably less this year and it took us below the threshold which meant we had to pay in advance. I'm in the process of finalising that, its a bit scary for me, we can't afford an accountant so im doing it myself. That might reduce the amount that they demand from you - they said you can also apply for a "right to reduce" form which basically means you tell them how much you earnt but don't have to present the tax return yet.
The thing i learnt from the national debt line is don't be bullied by creditors. The HMRC are the scariest of them all as they have the most powers but the key is to keep them informed and try and keep up promised repayments, if you can't TELL THEM.
Our business has struggled from day 1. Our own fault. Im very sad to read about your DHs business - a sad sign of the times and the personal cost of the recesssion.
don't wait to talk to the accountant - talk to the national debt line today - google it. I was on the verge of a breakdown - they turned things around. They are straight talking and ON YOUR SIDE. You would be amazed at the things that can help.
Good luck, i really do feel for you.
Thank you both. I will google the Debtline you mention LucyEllen, thanks. Just over 12 hours now til we see the accountant.
Is your DP still working in his business or has it been wound up? One of my fears is that we get this resolved, he tries to struggle on and then in 12 months we still have the same problem.
Btw I think he already has been making reduced payments and their patience has run out by the sounds of it.
The car is in my name thankfully and my money is in my own bank account. Will update tomorrow.
Yes, DP is still struggling on, and i sometimes wonder if it is worth it, but he needs to do this and make it work. Its almost like, well it can't get any worse, we have been to HELL and are not quite back yet so to just walk away would be the most sensible thing he could ever do, but it would break his heart as this is all he has ever wanted. And yes, we have been there and said that enoughs enough and 12 months later its still shit - thankfully i am going to go back to work when DD starts school and it will help, but christ alive, its been shit.
Do persevere with the national debt line, they can, in some circumstances, act on your behalf. Do you have personal debts too? We do, and DP is not limited company - we are in mortgage arrears etc, its not fun. BUT we are getting there with the help of the debt line. They are an absolute godsend, the only thing i would say is you have to ring and ring and ring, takes ages to get through, hours! Because we are not the only ones suffering.
Now, it probably wont come to this but a word about bailiffs. DO NOT LET THEM IN YOUR HOUSE. You are not obliged to let them in - but if you do, they can list your goods and chattels and could seize them at a later date. We have been down this road, thankfully they didnt go that far and have actually been really understanding. Those are the scary council tax guys too.
Credit companies etc, debt collection agencies have limited powers.
I know this is not my business, but if you are struggling with personal payments, credit cards etc, write to them and offer reduced payments - you have to provide a budget sheet showing incomings and outgoings. Also, you can ask them to freeze the interest. That way, you can possibly free up more money to pay priority debts which the HMRC is. There are sample letters on the national debtline website. They pretty much saved my life you know, as serious as that.
Good luck with it all.
Thanks again LE. No there are no personal debts and the mortgage is being paid. In fact I have savings but DH refuses to have/borrow them to pay the HMRC. I'm hoping the accountant will make him see sense or point us in the right way to go.
Sorry to hear how tough it has been for you. Really hope things pick up and thanks again for all your advice.
Phew - then there is hope, im sure you will sort it out. Thing is, if you can cling on by the skin of your teeth through this recession then you will be streets ahead of competitors who bail out now and try and come back in when things improve.
Hang on in there. They HMRC are pretty scary - but they are human.
Just a quick update - well DH announced he wasn't coming with me this morning to see the accountant So I went myself but couldn't answer his questions fully as DH is the only one who knows the answers.
So they (HMRC) can make a claim on our personal assets as some of the debt is personal debt (income tax). So my worst fear was confirmed.
anyway I went home and basically told DH this was a deal-breaker - go and see the accountant or just leave (sounds harsh but I needed to shock him to see how serious I was). so he agreed to see the accountant on Sat.
Still can't believe we are in this situation . Bloody recession !!!!
cathcat - that is very bad. Your DH is burying his head. He owes personal income tax as well?
You were right to make it a deal braker. He has to snap out of this. That is totally unfair on you.
My Uncle had several trucking businesses that he put into liquidation in three recessions. He just started up again when the economy picked up and your DH can do the same. One of my businesses went into adinistration last week.
It is not the end of the world but it needs to be managed properly as a process and care needs to be taken not to break the law and not allow the financial spillover to impact personal finances.
I say again, please take care to keep your financial affairs separate from DH and the business.
Thank you for your words of support - it is reassuring that I am doing the right thing - starting to feel all at sea with the enormity of it all.
I am not sure that he will be able to start another business of the same type. It is basically a dwindling trade. He may have to find a different job or retrain. But so long as we can keep a roof over our heads that is all that matters.
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