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bigduckontax
bigduckontax, Accountant
Category: Tax
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I have a limited company, the company is not making

Customer Question

Hi,
I have a limited company, the company is not making a loss and i only have around £10,000 in the bank, i am now unable to pay my corporation tax bill of £35,000 for the previous years profits. The company has no assets and i need some advice on what to do, what are the consequences of not being able to pay for Corporation tax Bill? Will i personally be liable for it? Will i need to file bankruptcy? Is there anything else you think I should know about?
Any help/advice would be much appreciated.
Thanks
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question and a Chartered Secretary to boot. HMRC will adopt the not unreasonable view that as you made profits in the past and incurred Corporation Tax (CT) your company should have set the appropriate amount aside to meet the bill. A company, its shareholders and directors are all separate legal entities. In general terms shareholders and directors are not liable for the debts of a company, but there are some exceptions. Where a fraudulent preference has taken place, that is one creditor has been paid in favour of another or funds paid out when there are outstanding creditors then the appropriate officers of the company can be proceeded against. Indeed, a fraudulent preference is a criminal offence. You might be in a spot of bother here if this is what has happened. Now in the past HMRC's stock in trade was to apply to the courts for a compulsory winding up. Whilst tax debts were preferential creditors this was good news for the tax man, however, the law has changed and tax debts are no longer preferential. What I would suggest that you do now is to enter into negotiations with HMRC with a view to arranging a recovery schedule which the company can manage. There is an alternative, and indeed you may need to do this as your company is insolvent unless HMRC will agree to a staged repayment, and that is to file for insolvency. Another route is to lend to the company yourself to clear the debt on the due date. Can you not obtain bank funding for the exercise? Remember, if the company has gone into a loss situation in the year of trading after the massive CT bill year then that loss can be carried back to reduce the prior year profit thus reducing CT at a stroke, but you indicate that this is not the case. I do hope that I have been able to shed some light on the situation. Just don't drag your heels, get on to HMRC quickly..

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