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Strike off company with HMRC debts

HMRC is commonly a large creditor when businesses are insolvent, and given their power to quickly wind up companies that owe them money, you must contact the tax body if you’re considering voluntary strike-off.

Voluntarily dissolving your company when it has HMRC debts is not recommended and could lead to legal action being taken against you. Furthermore, it’s unlikely that an application for strike-off would go through without HMRC objecting if they’re owed money.

Trying to dissolve your company without paying your tax debts will be viewed by HMRC as a deliberate attempt to outmanoeuvre them, but there is a closure method that avoids these problems and enables you to fulfil your legal duties as a director.

Creditors’ Voluntary Liquidation (CVL) if you have HMRC debts

Creditors’ Voluntary Liquidation, or CVL, is an official insolvency procedure that you can use to close down your business if it has HMRC debts or owes money to any other creditor. During this process, your company’s assets are sold to repay as much debt as possible, and the remainder is written off.

CVL safeguards creditors from the unnecessary financial losses that can occur when directors continue to trade when insolvent but also protects you and other directors from disqualification and personal liability.

This process is conducted by a licensed insolvency practitioner (IP) so you also have the reassurance that all statutory requirements are met. So how does this compare with attempting to strike off your company with HMRC debts?

You can close down a solvent company in two different ways – the most suitable generally depends on the value of retained profits available. Members’ Voluntary Liquidation (MVL) offers a tax-efficient way to close your company if it has £25,000 or more in assets and cash.

If your company doesn’t own valuable assets, voluntary dissolution may be the simplest route to take. Both of these methods ultimately mean the company name will be removed from the Register of Companies and cease to exist.

Considerations

  • If you close your company rather than making it dormant there’s no further business administration to conduct
  • If you closed it down and later regretted your decision, you’d have to start the company formation process again
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  • Company Health Risk Assessment

  • Types Of Liquidation Available

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Risks of striking off your company when it has tax debts

If you deliberately try to avoid meeting your company’s liabilities to HMRC you risk serious allegations including director misconduct, which can lead to severe penalties. These can include:

Director disqualification

You can be disqualified as a director for 2-15 years, which can negatively affect your life in several ways:

  • You won’t be able to be a director of any UK company during this time
  • You cannot be involved in forming, marketing, or running a company
  • You may be banned from other roles and offices – for example, school governor or pension trustee
  • You won’t be able to practice as a solicitor, an accountant, or a barrister

Breaking the terms of a disqualification order could also lead to a hefty fine or a prison sentence.

Personal liability

If it’s found that you’ve worsened the financial position of HMRC or any other creditors you could be held personally liable for some or all of the company’s debts. HMRC pursue their debtors through the courts, which can lead to personal bankruptcy for some.

An important point to remember about voluntarily dissolving a company with HMRC debts is that even if a strike-off application goes through, the tax body can apply to have the business restored to the register at any point in the future.

If you need any further information about striking off your company or currently owe money to HMRC, please get in touch with Company Closure for reliable advice. We operate an extensive network of offices around the country and can offer a free consultation to quickly establish your options.

The first step is to obtain professional advice to determine the most suitable method. Our experts at Company Closure can help you with this and provide the reliable guidance you need.

Members’ Voluntary Liquidation must be administered by a licensed insolvency practitioner and typically takes around six months to complete, depending on the complexity of your business affairs.

Voluntary dissolution is carried out by you and your fellow directors. You must have ceased trading for at least three months and followed a specific set of requirements in winding down your business prior to applying.

 Don’t Fall Foul of Unqualified Advice

Beware of the risks of unregulated advisers – only licensed insolvency practitioners can handle insolvency appointments and closure procedures from beginning to end. In contrast, unlicensed insolvency advisers will pass your enquiry onto a third party and charge a premium for doing so. Contact our licensed, specialist team today for FREE.

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With multiple offices across the UK and a vastly experienced team of business closure experts, you are never far away from the advice you need. Our Licensed insolvency practitioners provide free consultations to all directors and shareholders, and can quickly ascertain which closure method is best for your business.

We are licensed by recognised professional bodies and have helped thousands of directors over many years. Contact us today for your free company closure consultation.

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