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This article was written by David Colom
of Platinum Umbrella the executive management
and payroll umbrella service for premium contractors.
Introduction
Can closing your Limited Company or making it dormant protect you from HMRC investigations?
This article explains the issues.
Revenue can investigate dormant or dissolved companies
The fact that your company has become dormant or even dissolved or struck off, does not in any way prevent HMRC from investigating either your own tax affairs as director of the company or the company’s tax affairs.
In the event that the company has been dissolved, HMRC is entitled to apply for it to be restored to the register, which in practice they would have no hesitation in doing, if the amounts of tax outstanding make the exercise worthwhile to them.
Years for investigation
Where accounts and personal tax computations have been filed in good time in accordance with the usual HMRC time limits for filing, then the usual time limits (up to six years) for investigation would apply but in the event that fraud or negligence are alleged by HMRC, they are entitled to launch an investigation which can cover up to 20 years.
Keeping records
Both corporate and personal/self assessment tax records should be maintained for a period of six years, in order to deal with any enquiries which might arise.
Thus, for example, an enquiry might be launched a number of years after the company has been dissolved for activities started after the dissolution.
Likelihood
In practice, it is highly unusual for a one man consultancy company to be investigated after it has been dissolved and would only usually be initiated by an Inspector of Taxes in the event of a large back duty case covering the general affairs of an individual who was also the director of such a company.
...the closing down of a company can in no way be considered any defence against a HMRC investigation or enquiry...
David Colom - Platinum Umbrella
Notwithstanding this however, the closing down of a company can in no way be considered any defence against a HMRC enquiry/investigation or the liabilities and penalties which might arise as a result of such an investigation, regardless of the company having been made dormant or closed down/dissolved.
Published: Wednesday, February 28, 2007