HMRC don’t issue winding up petitions lightly so it must mean that you have gone through various stages of Debt management before your file gets to the office of HMRC that will issue the winding up petition. There are only two offices of HMRC in England & Wales that can issue a winding up petition and they are Worthing Office in West Sussex and Cardiff office in South Wales. In Scotland and Northern Ireland, everything is sent by an HMRC office in Edinburgh. So, if you are receiving letters or phone calls from Worthing, Cardiff or Edinburgh offices of HMRC you are in a serious situation.
For Companies, we deal with either a “Warning of Winding Up Action” letter from the Late Stage Debt Resolution team or a letter from the Worthing, Cardiff or Edinburgh offices stating that “if you do not make payment, in full, within 7 days of the date of this letter I will instruct the solicitor of HMRC to present a petition to the High Court to wind up the company” or if you have actually received a winding up petition from the High Court of Justice.
For individuals, you are going to get similar letters from Edinburgh, Worthing (although this is now ending) or Long Benton in Newcastle. Similar processes happen and again, we can help.
All HMRC English and Welsh winding up hearings are always held on Wednesdays at the High Court in Fetter Lane, London and normally happen around 6 weeks from the date of the initial petition being issued.
If you receive a “Warning of Winding Up Action” letter from an office of HMRC other than Edinburgh, Worthing or Cardiff, then you are not in such a serious situation and have a bit more time but nevertheless you probably still need our help.
Even when HMRC are involved in the insolvency, we can help, as it is very common for HMRC to notify Companies or individuals experiencing an insolvency event of amounts owed to HMRC. These figures often bear little relationship to the true debt.
Many of our staff have spent a long time working for HMRC and have experience of these debts and are aware that they are almost always far too high. Yet, very few cases are ever challenged.
The government decided that self-assessment and the internet age, would enable them to vastly reduce staff numbers by placing the onus on the individual or company to file via the internet. When necessary HMRC comes up with a guess at what it is owed e.g. in an insolvency scenario. By definition, ‘the guess’ is going to be wrong, yet hardly anyone bothers to challenge it.
- 1. The Solution:
We have set up a business – Forensic Investigation and Taxation Services “FITS”, to address this obvious problem which is that most think they can do nothing about it. We also offer similar assistance to those in the insolvency profession. It is important to note that but just because HMRC has proven for a claim, it does not mean nothing can be done.
- 2. The Practice:
We may need your help accessing records. Once we have these we can get to work. The insolvency professional involved is bound by their regulating body to consider all claims if a dividend is going to be paid. That means HMRC gets to vote what is typically an inflated estimated debt figure which often unduly influences the landscape of the insolvency. Far too often through no fault of their own Insolvency Professionals often do not have the either the requisite skills or the necessary funding allowing them to correctly review HMRC claims. Imagine is such help was available risk free on a results basis. It now is.
- VAT – The liquidator or trustee in bankruptcy is entitled to use the records to supply the relevant returns. Having incomplete records does not prevent an attempt at a VAT Account reconstruction from all the available evidence e.g. bank and creditor records, input from directors and at the very least will give a closer idea of the debt than an HMRC guesstimate.
- PAYE and NIC – the situation is different, in that the Real-Time information system requires that HMRC are paid at the same time as the employee. So, the debt should not arise, and no claim should result. HMRC does want to know the details so that the individuals NIC records are up to date for state benefit or pension purposes and therefore there is a benefit if someone can do this work for them and get to the right figures.
- Income Tax or Corporation Tax – we attempt to re-construct accounts. It is not HMRC who decides on the debt, but the insolvency professional, who only must rule on this if they have a dividend to pay. What is interesting, is that HMRC will often accept reasonably argued accounts formulated to a lesser standard than those for a trading business. With our extensive knowledge of HMRC best practice we are easily able to draft these accounts with a view to reducing inflated claims and benefiting thus the insolvency.
- Construction Industry Scheme – whilst the system has been running for some time and is often accurate, given that both sides, the contractor and sub-contractor must give details to HMRC, should you need assistance, we will ask HMRC for the statements and ascertain where you think it parts with the facts and take matters forwards from there.
- 3. Other Areas:
We also have more specialised areas of HMRC intervention work where we can assist: –
- Personal Liability Notices (PLN’s), where the National Insurance debt for the entity is transferred on to the former director in a personal capacity of a business. See the other Tab concerning these.
- PAYE Directions, where the individuals tax liability is transferred on to the director, because HMRC believe they did not operate the PAYE system correctly. See the other Tab concerning these.
- Tax Avoidance Schemes: Seeking to mitigate if you have used an ‘avoidance scheme’ and are now faced with an unexpected tax bill. See our separate tab concerning some of these
- Personal Expenses: we frequently see ‘wholly and exclusively’ claims not being allowed, usually by accountants, yet falling within the permissible regime. See the other Tab concerning these.
And for the professional specialised area of insolvency where we can help in the following areas to name a few; –
- Overdrawn directors loan accounts
- Resolving the tax debts
- Employee Benefit Trusts (EBT’s) (see separate tab), and other avoidance schemes.
- Assisting your staff with a better understanding of the mechanics and operations of HMRC which should reduce time costs to the advantage of creditors especially where insolvency is involved.