Yes, HMRC can investigate and chase dissolved companies if they have outstanding tax debts when they are struck off from the register at Companies House. HMRC can chase for payment for up to six years from the date of dissolution and apply to reinstate the company, investigate company affairs and director conduct.

What is company dissolution?

Dissolution ends a company’s legal existence by striking it off the register at Companies House. The procedure is voluntary and is intended for companies that have no outstanding liabilities and are no longer trading. The procedure should not be used as an alternative to formal insolvency procedures, such as a Creditors Voluntary Liquidation (CVL). There are set criteria needed for a company to enter dissolution.

A company can’t apply for a strike off if, three months prior to application the company has:

• Changed its name.
• Traded or continued carrying out business.
• Engaged in any other activity, except for those that are necessary for the purpose of applying for dissolution, such as seeking professional advice.
• Entered into any insolvency proceedings such as liquidation, including where a petition has been presented but not yet been dealt with.
• Entered into a compromise or arrangement with its creditors or members – This is also known as a section 895 scheme of the Companies Act 2006.

What action can HMRC take?

HMRC can act against a company if they believe it has been wrongly dissolved with tax debts. HMRC could consider, but will not limit their options to:

• Reinstatement of the Company
  HMRC can apply to the courts to have a company reinstated. The company in question would be put back on the Companies House register, so the dissolution would no longer be in effect.
• Investigation
  When a company is reinstated, HMRC can thoroughly investigate the financial activities of both the company and director.

What do HMRC investigate in a dissolved company?

If HMRC believe that a company has been wrongly dissolved and has not followed protocol, they can conduct thorough investigations into the company’s dealings. Typically, HMRC will investigate, but won’t be limited to:

• Unpaid tax debts
  A company should not go through the dissolution process without repaying all of its tax debts.
• Compliance with dissolution procedures
  By law, companies must follow the set criteria and process for a dissolution. Neglecting these steps, such as not informing all creditors, including HMRC, of notice to dissolve a company.
• Preference payments
  A preference payment occurs when an insolvent company makes an intentional payment which will directly benefit one creditor above another.
  Read more on preference payments
• Fraudulent activity
  Company directors have acted fraudulently, by knowingly increasing the financial losses to creditors prior to dissolving the company or accepting orders that could not be fulfilled.
  Read more on fraudulent trading
• Breach of director duties
  A director may have acted in their own personal interests instead of doing what’s best for the company’s creditors.

Can HMRC chase directors personally?

Yes, HMRC can pursue company directors once a company has been dissolved. Company directors can be held personally accountable for some, or all a company’s outstanding tax debts, if HMRC believe that wrongful or fraudulent trading has taken place.

How we can help

If your company is trading with debts and you’re considering a dissolution, it’s important to note that the process should not be used as an alternative to a formal insolvency process, such as a Creditors Voluntary Liquidation. If you’re concerned about HMRC payments, or other debts, we can talk through your company’s solvent position and advise on the correct procedure.

1. Speak with our initial advisers via phone or online chat. If we can help, we will arrange a free consultation with one of our consultants to discuss your situation in more depth.
2. During the consultation, we will advise if an insolvency procedure is the most appropriate route forward, or what alternative options are available.
3. After your consultation, if there is an appropriate route forward, we will issue the relevant documentation for you to formally engage us.

In summary

HMRC can investigate and pursue dissolved firms if they owed HMRC money at the time they were struck off the register at Companies House. HMRC has up to six years from the date of dissolution to pursue the payment, apply to restore the business, and examine company affairs and director conduct.

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