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Received A Winding Up Petition From HMRC?

A winding up petition from HMRC is a serious threat and could be the end of your business. Read on to find out how to respond and limit the impacts.

If your business has received a winding up petition from HMRC, you need to act quickly. HMRC are known to be very aggressive in their recovery of debts.

You have 7 days to respond to this petition before it is published. At this point, your business essentially can no longer trade and it is only a matter of time before liquidation begins. Read on to find out exactly what this means for you and your business.

The Winding Up Petition Process

A winding up petition is the final step before a creditor forces your company into liquidation. It is issued by a creditor and you have 7 days to respond before it is made public. Once the petition has been published:

  • Business bank accounts can be frozen.
  • Suppliers may stop working with you.
  • You will not be able to access finance or credit.
  • Personal guarantees can be triggered.

There will be a date set for a court hearing. After this court hearing, a winding up order will be issued. This begins the formal liquidation of your business. At this point, the situation is out of your control, hence why it is incredibly important to act as soon as you receive a winding up petition.

The Consequences Of Liquidation For Directors

When a company enters liquidation, a licensed insolvency practitioner is appointed to oversee the process. This can cause a variety of different issues for directors. Some of which include:

Personal Guarantees

Any formal insolvency event will make you liable for personally guaranteed debts. This means that you will be pursued by the lender, often aggressively for the full amount outstanding. In the worst-case scenario, you may be at risk of losing your assets, your home or even being made bankrupt.

Director’s Loan Account

Taking money from your business is not illegal. However, in the event of insolvency, it will be viewed as a company asset. This means that the liquidator will make you repay it. Although you may have “only taken a small amount”, liquidators will often add additional costs and other expenses to the final bill. This means you could be asked to pay a vast sum or, face bankruptcy.

Illegal Dividends

Similar to a director’s loan, illegal dividends are dividends that are taken when a company is not profitable. So, if you take dividends and your company enters liquidation, you will be made personally liable. As with a director’s loan, this will likely be a much larger amount than you initially anticipated.

Personal Exposure for HMRC Liabilities

If you have received a winding up petition, your business will have HMRC arrears such as VAT, PAYE or Corporation tax. If these arrears have been built up due to negligence as a director, you can be made liable, and HMRC may also add additional penalties. Further to this, you can face criminal charges and disqualification as a director.

Mis-spent CBILS/BBLS

It has come to light that many of these loans were mis-spent or fraudulently obtained. As part of liquidation, your business’ finances will be investigated. If it is found that you spent one of these loans on anything other than business expenses or, you lied to obtain it you can be made liable for the debt. You can also face disqualification and even criminal charges.

These are some of the most common issues that arise as a result of a winding up petition, especially when HMRC is your main creditor. These outcomes can be prevented through swift action, this is why it is so important to get the right advice, at the right time.

Leah O’Kane

Associate Director

10/10 Experience and Result

I would like to thank Rory and the team for an excellent service and a first class result, a result that was much better than expected. Having Bell and Company on board has lifted all the stress and let me…

10/10 Experience and Result

I would like to thank Rory and the team for an excellent service and a first class result, a result that was much better than expected. Having Bell and Company on board has lifted all the stress and let me move on with running my business. Couldn’t recommend highly enough.

Mr Graham – GB

How To Deal With a HMRC Winding Up Petition

There are various options available that do not involve formal insolvency proceedings. However, the key element here is to halt the winding up of your company and prevent further legal action.

If your business is unlikely to recover, liquidation may be the most commercial option available. However, it needs to be done in a controlled manner with the help of an expert team who have your best interest in mind. This alternative route informs directors of their worst-case scenario whilst giving them time to prepare and reduce the personal impact on them.

If you have received a winding up petition from HMRC, do not hesitate. You can contact us today to speak to a business debt specialist on 0330 159 5820 or fill in the form below.

Contact us today to speak to a business debt specialist.

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