# Revenue debt and company insolvency



## BeeGee (8 Aug 2016)

Hi, I am a director of a small company where I am the secretary also, I am facing a large bill (s) from the Revenue for various returns not yet filed. 
I am probably looking at around 20k before penalties and interest in vat and P35. They have already written to me giving 21 days notice to supply outstanding returns and pay all balances.
If the company is insolvent what happens to the revenue debt? 
Does it pass to you in a personal debt?
If so what is the point of having a limited liability company? 
Any advice would be very useful


----------



## Stuboy (9 Aug 2016)

BeeGee said:


> Hi, I am a director of a small company where I am the secretary also, I am facing a large bill (s) from the Revenue for various returns not yet filed.
> I am probably looking at around 20k before penalties and interest in vat and P35. They have already written to me giving 21 days notice to supply outstanding returns and pay all balances.
> If the company is insolvent what happens to the revenue debt?
> Does it pass to you in a personal debt?
> ...



what type of revenue returns are outstanding? VAT / PRSI / PAYE etc?
that could have a bearing as far as I can remember.
what way are you winding the company up? that may have a bearing i.e. have you just let the annual returns to the CRO slide and been struck off?
My advice would be to call a company accountant, you could probably book an hour with them for advice


----------



## BeeGee (9 Aug 2016)

Hi, it's a mixture of returns both vat and prsi, the CRO side of things is ok but the reality is that the Revenue will be pretty much the main creditor and the business will not have the capability to pay these bills and provide me with enough take home pay simultaneously. 
I am looking for a job at the moment so I'm being realistic about the company outlook


----------



## TLO (9 Aug 2016)

Okay, so if the company is not able to pay its debts as they fall due, it fails one of the key solvency tests.  To avoid a declaration of reckless trading, and to avoid the possibility of being made personally liable for the company's debts, you should stop the company from trading as soon as possible.  The company should also file the outstanding returns to the Revenue.  The company can't pay the Revenue, it doesn't have the money, but it should get the returns up to date.  As soon as they have been filed, call a creditors meeting and wind the company up.  Things go wrong all the time. Handling the situation properly will cause the debts to die with the company and avoid the possibility of you being made personally liable. As per Stuboy above, you should get professional advice from an accountant with insolvency experience.  Don't try and deal with everything by yourself, it's too much of a head wreck, and the chances of making a mistake are high.


----------



## Patgdirector (14 Aug 2016)

If BeeGee is also 100% owner of the company I thought revenue would treat him as being a sole trader?


----------



## Stuboy (15 Aug 2016)

Patgdirector said:


> If BeeGee is also 100% owner of the company I thought revenue would treat him as being a sole trader?


No, if you have a limited company you are legally a limited company, there will be other company directors (unless it was formed under the new limited forms; DAC, Ltd etc.)


----------



## Gervan (15 Aug 2016)

"Revenue will be pretty much the main creditor and the business will not have the capability *to pay these bills and provide me with enough take home pay simultaneously."
*
So you have been using the Vat money as your living expenses?


----------



## BeeGee (16 Aug 2016)

Gervan said:


> "Revenue will be pretty much the main creditor and the business will not have the capability *to pay these bills and provide me with enough take home pay simultaneously."
> *
> So you have been using the Vat money as your living expenses?


Hi , I haven't been intentionally using the Vat money but I suppose it would appear that way.


----------



## BeeGee (16 Aug 2016)

Stuboy said:


> No, if you have a limited company you are legally a limited company, there will be other company directors (unless it was formed under the new limited forms; DAC, Ltd etc.)


Hi, it's a normal small company scenario with two directors.


----------



## Learner2015 (16 Aug 2016)

I would think that if this ends up as a court directed liquidation normally funded by revenue the judge will take a very dim view of a director drawing living expenses but not paying his taxes. The liquidator will have to prepare a Section 56 report which will more than likely not be able to pursuade the ODCE from not restricting the director as acting as a director for a number of years.

I would think act fast, appoint a liquidator and call a creditors voluntary liquidation before the revenue call a court liquidation. As TLO said you don't want wreck less trading thrown into the mix aswell.


----------



## Gordon Gekko (16 Aug 2016)

Non-payment of "fiduciary taxes" such as VAT and employee PAYE sends Revenue over the edge because the company was merely a collection agent for money that was never its own. Expect a nasty ride.


----------



## Patgdirector (16 Aug 2016)

A friend of mine was in the same situation he owed 150k to revenue. He appointed a liquidator called a creditors meeting. All over in a few minutes, job done. So don't worry


----------



## Jon Stark (17 Aug 2016)

Patgdirector said:


> A friend of mine was in the same situation he owed 150k to revenue. He appointed a liquidator called a creditors meeting. All over in a few minutes, job done. So don't worry



"He" didn't owe 150k to Revenue though, or else a liquidator wouldn't be much use...


----------



## Robert4 (17 Aug 2016)

Hi, I was in same position 3 yrs ago, director in a limited company, main creditor was revenue, but due to the economic crash we had no ability to pay, our debts were far greater than our assets.
We ceased trading and informed revenue in writing, giving them a written breakdown of our  assets / debts etc. 
We did not go into liquidation as such (this costs money) we just let the CRO strike us off for non returns.
Revenue did not pursue.
Hope this helps


----------



## Patgdirector (17 Aug 2016)

Did you inform revenue that you had ceased trading and that struck off from CRO. Was their final accounts


----------



## BeeGee (17 Aug 2016)

Patgdirector said:


> Did you inform revenue that you had ceased trading and that struck off from CRO. Was their final accounts


Hi Patg, 
I have accounts done for 2015 and I have to sort out accounts for the current year, I have spoken to an insolvency practice so will have to get the ball rolling very shortly. 
Would like to thank everyone who replied to my post.


----------



## Jim Stafford (30 Aug 2016)

You face two possible issues here: Being restricted as a director (for not acting "honestly and responsibly") and personal liability for the PAYE if the PAYE was deducted from your salary but not paid over. You do face a theoretical possibility of being held personally liable for all of the debts of the company if it can be proven that you traded recklessly or fraudulently: However, given the relatively small quantum of the debts and the legal costs that would be incurred in pursuing such an action such a possibility is remote.

The Revenue are legally entitled to pursue directors for any PAYE that was deducted from their salaries and not paid over, and in practice they do so.

If you examine the Form 11 income tax return to be filed by directors you will note that directors are only entitled to claim  credit for PAYE on their director's salary if it is actually paid over.

Jim Stafford


----------

