Owe HMRC Thousands So Can I Liquidate My Company Today?
Owe HMRC Thousands So Can I Liquidate My Company Today? If your company owes a significant sum to HMRC and you simply do not have the means to pay it back, liquidation might be an option to enable you to liquidate your company today.
It is not unusual for businesses to run into financial trouble, and if you are worried about the consequences of not being able to settle your HMRC tax debts, creditors voluntary liquidation might then help your company today, particularly if you have already ceased trading with no prospect of avoiding insolvent liquidation.
Can I Close My Company If I Owe HMRC Money?
Yes, it is possible to close a limited company even if it has outstanding debts with HMRC. In fact, many directors choose to go down the route of Creditors Voluntary Liquidation (CVL) when their company cannot meet its liabilities when they fall due and therefore insolvent.
What Is Creditors Voluntary Liquidation?
In a CVL, a licensed insolvency practitioner is appointed to deal with the company’s affairs. This is a procedure made available under Part IV Chapter IV of the Insolvency Act 1986.
They do so in the capacity of the liquidator.
They will handle the communication with HMRC and other creditors, sell any company assets, and make sure the legal process of winding up is handled properly, with any surplus after costs of liquidation going to creditors as required under the Insolvency Act 1986. Importantly, once the company is liquidated, it no longer has to pay its debts, although the directors must cooperate fully and act in good faith throughout.
Will I Be Personally Liable for the HMRC Debt?
Most directors are not personally responsible for company tax debts, as long as there has been no serious wrongdoing. Limited companies are separate legal persons in law, which means debts belong to the business itself, not the individuals behind it.
However, there are exceptions.
Personal Liability Notice
In the event of misconduct such as serious neglect or fraud, HMRC has the power to issue a Personal Liability Notice (PLN) which can result is a director being required to settle HMRC debts they have irresponsibly caused.
Breach Of Director Duty
Also, if you have traded while knowingly insolvent without a prospect of avoiding liquidation (wrongful trading), or failed to pay over PAYE or VAT that had been deducted or collected, HMRC may look more closely at your conduct. That is why it is important to seek advice early, especially if you are unsure whether any past decisions might cause issues.
What Happens After Liquidation?
Once a company starts to be liquidated, it stops trading, its bank accounts are closed, and any assets are sold off to pay the costs of liquidation, and any surplus goes to creditors when possible. The insolvency practitioner will investigate the company’s financial history, report to the Insolvency Service as required under the director disqualification regime, and after everything is complete, the company is removed from the register at Companies House.
For directors, liquidation can feel like a fresh start. If everything has been done properly, you can walk away with no ongoing responsibility for the company’s debts. However, this in reality is no different than respecting the fact that a company is a separate legal entity from its directors. You are also free to start another business, unless you are disqualified as a result of misconduct.
Think You Need Help To Liquidate Today?
If you are feeling overwhelmed because your company owes HMRC thousands and you are thinking about liquidation today, you are not alone. Many directors have been in your shoes and found peace of mind by taking action sooner rather than later.
We can talk you through your options, help you understand your responsibilities, and if you decide to proceed with liquidation, make the process as straightforward as possible. We would explore all the options available, not just liquidation, to ensure you are made fully aware of the alternative procedures available to you.
