Bankruptcy procedures?
claudialowe
Registered Posts: 275 Dedicated contributor 🦉
Can anyone help?
I have just had a client phone, saying that they are going to let HMRC make them bankrupt. No real shock, they are in the building industry and life has been hell for a while, so I think that they are pleased to have made the decision.
But - what do I still need to do for them (if anything)? Their accounts for last year are outstanding - well due by tomorrow.....
Do they need completing or not? If so, who pays me?
And what about all the things that I haven't yet thought about it? :confused1:
Claudia
I have just had a client phone, saying that they are going to let HMRC make them bankrupt. No real shock, they are in the building industry and life has been hell for a while, so I think that they are pleased to have made the decision.
But - what do I still need to do for them (if anything)? Their accounts for last year are outstanding - well due by tomorrow.....
Do they need completing or not? If so, who pays me?
And what about all the things that I haven't yet thought about it? :confused1:
Claudia
0
Comments
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Deleted - Duplicate post0
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Having temped for the insolvency service for a while and had a client go bankrupt last year I know a bit about this!
The client should be issued a new UTR which will probably 'commence' in 2009/10. If the 2007/08 and 2008/09 returns are submitted any tax due will fall into the bankruptcy order so the client won't have to pay it. I think that if no returns are submitted they just estimate the tax due (not that they're going to see a penny of it anyway).
The client usually takes all books & records to the insolvency service when he/she has their interview, otherwise someone from the IS may collect them later, as they may need to investigate to make sure there's nothing fraudulent etc.
Any fees which your client owed you before the bankruptcy date you'll have to write off, but you can charge them if they ask you to do anything now!
Are they continuing to trade? When my client went bankrupt they stopped issuing VAT returns - the VAT number stays the same but you will need to have a word with them if they're still trading (and VAT registered, of course)
jodie0 -
Hi Jodie
Many thanks for the reply.
Does the same go for Ltd Co's? They are, and owe stack loads mainly to HMRC (every tax going - VAT, CT, PAYE and personal as well).
Their Ltd Co accounts will be overdue after the weekend. I know that Co House are not concerned, but will HMRC? The pragmatist would say that if they owe that much already and can't pay, then what is the point of finding out if they owe more!!!! but this is HMRC that we are talking about.....
There could well be problems for the director personally down the line, as there was a massively overdrawn DLA.
Will I need to do Ltd Co accounts? Will someone else do them?
Many thanks for your help so far, and any further info would be most appreciated.
Claudia0 -
As far as I'm aware it's exactly the same for Ltd Companies. All the outstanding tax gets estimated & added up & that's the figure that gets passed to the Insolvency Service or sometimes to an Insolvency Practitioner. Then they get a % of whatever's left after the assets have been disposed of and the IP's taken their cut. Unless there's some huge assets involved they're unlikely to get anything at all, which is why they generally aren't bothered about the accuracy of their claim.
And yes, it's very common to see directors being made personally bankrupt after their companies are liquidated.
It's probably something we're all going to have to get clued up on properly now isn't it?!0 -
If the director has massive overdrawn directors loan accounts then he will become liable to repay that money to the company. Chances are that if HMRC make them bankrupt the file will be past to Official Receiver who will look to recover any debtors or assets including overdrawn directors loans.
If the director has any money it is sometimes more beneficial to appoint a friendly liquidator who may help the directors avoid potential pitfalls, unfortunatley most liquidators charge approx £5000 unless there are assets in the business which can be used to pay their fee.
Its not always best to wait and see what HMRC do.
Another alternative that I have done for my clients is to prepare the final accounts to cessation with payment upfront obviously and then we have sat with the client and drafted a letter to all creditors including HMRC. We have then sent the letter together with a copy of the accounts explaining that due to current climate and continiuing losses the business is no longer able to continue trade.
After doing this we have known HMC&E to take no action at all depending on the amounts and likewise with CT.
If you dont already know one it may be worthwhile striking up a relationship with a local insolvency practitioner. We did this a few years ago and he now comes to our office whenever needed to hold initial meetings with our clients free of charge to help them understand their options better going forward.0 -
Thanks a lot both of you for your wise words - and groundy your idea of a local IP is brilliant.
I know what needs to go on my CPD action-plan now :001_smile:
Claudia0 -
If you dont already know one it may be worthwhile striking up a relationship with a local insolvency practitioner. We did this a few years ago and he now comes to our office whenever needed to hold initial meetings with our clients free of charge to help them understand their options better going forward.
I like that idea too
One thing your client (or you) will need to do is draft a list of debtors and creditors at the date of bankruptcy.0
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