3 ms·

Will a voluntary liquidation harm my chances of future investment? (UK)

In a nutshell, I have a business idea that I would love to work on, that may require investment (I've had positive initial feedback). But I have a large outstanding debt to HMRC, which I am struggling to pay (I made mistakes when I started contracting, and didn't put enough money aside. I've since learned my lesson.) A voluntary liquidation looks like a sensible option at this point. But I am worried that winding up my company in this will this appear as a stain on my character, and put off potential investors? Is this a legitimate concern? Any help deeply appreciated!

opless 11y ago
I'm not an accountant/tax adviser, and I would take advice from yours. Many entrepreneurs fail often. Debts however are another thing. Especially with HMRC, I'd have a chat with a professional about your HMRC debt. That aside, investors would want assurances their money go into the business and not the paying off your other businesses or any personal debt :)
charlesdm 11y ago
Does voluntary liquidation mean personal bankruptcy? Or is this at the corporate level (i.e. your Ltd company)? Who owes the debt - you or the company? HMRC debt might also be harder to get out of. In general, corporate bankruptcy tends not to be a big problem. Personal bankruptcy, well, you become toxic to banks. It usually doesn't matter much to angel investors, but it can be a problem when trying to secure debt financing through traditional channels. It can however become a problem trying to secure personal stuff like credit cards or mortgages. It's a good idea to talk to a lawyer about this.
- worriedinlondon 11y ago
  Thanks for the advice. It's just the company that would be affected, I don't have any debts personally. Cheers!
  - charlesdm 11y ago
    Do talk to a lawyer though. In some countries, under certain circumstances, there can be a shareholder liability for certain tax debts. Especially when you're using a personal service company. Good luck - hope you can fix this situation.
  - charlesdm 11y ago
    Also, and it depends on if there's a chance you might be personally liable, but if you intend to let the company go bankrupt, you might as well try and use that to negotiate the debt down (if that's at all possible). For example, let's say your debt is £50,000. If you declare bankruptcy, they get £0. Offer to pay them £15-25,000 - if they don't agree, declare bankruptcy, and they get nothing. Not sure if this will work with the tax authority, but I've heard this being used with private debt (bank loans) and it can work.
BjoernKW 11y ago
I'm pretty sure Her Majesty won't simply release you - or your company for that matter - from tax debt just because you declare bankruptcy, personal or otherwise. Tax debts are notoriously difficult to get rid off in any other way than paying them. Maybe, payment by instalments is a possibility but otherwise you might not have too many options. Besides, this also depends on what kind of company you founded. If I remember correctly, both the director and the secretary of a private limited company for instance are personally liable for the company's tax debts as well (at least to a certain extent).

opless 11y ago

I'm not an accountant/tax adviser, and I would take advice from yours. Many entrepreneurs fail often. Debts however are another thing. Especially with HMRC, I'd have a chat with a professional about your HMRC debt. That aside, investors would want assurances their money go into the business and not the paying off your other businesses or any personal debt :)

charlesdm 11y ago

Does voluntary liquidation mean personal bankruptcy? Or is this at the corporate level (i.e. your Ltd company)? Who owes the debt - you or the company? HMRC debt might also be harder to get out of. In general, corporate bankruptcy tends not to be a big problem. Personal bankruptcy, well, you become toxic to banks. It usually doesn't matter much to angel investors, but it can be a problem when trying to secure debt financing through traditional channels. It can however become a problem trying to secure personal stuff like credit cards or mortgages. It's a good idea to talk to a lawyer about this.

worriedinlondon 11y ago
Thanks for the advice. It's just the company that would be affected, I don't have any debts personally. Cheers!
- charlesdm 11y ago
  Do talk to a lawyer though. In some countries, under certain circumstances, there can be a shareholder liability for certain tax debts. Especially when you're using a personal service company. Good luck - hope you can fix this situation.
- charlesdm 11y ago
  Also, and it depends on if there's a chance you might be personally liable, but if you intend to let the company go bankrupt, you might as well try and use that to negotiate the debt down (if that's at all possible). For example, let's say your debt is £50,000. If you declare bankruptcy, they get £0. Offer to pay them £15-25,000 - if they don't agree, declare bankruptcy, and they get nothing. Not sure if this will work with the tax authority, but I've heard this being used with private debt (bank loans) and it can work.

BjoernKW 11y ago

I'm pretty sure Her Majesty won't simply release you - or your company for that matter - from tax debt just because you declare bankruptcy, personal or otherwise. Tax debts are notoriously difficult to get rid off in any other way than paying them. Maybe, payment by instalments is a possibility but otherwise you might not have too many options. Besides, this also depends on what kind of company you founded. If I remember correctly, both the director and the secretary of a private limited company for instance are personally liable for the company's tax debts as well (at least to a certain extent).