As a director of a Limited Company, you will have limited liability from creditors, including HMRC. This essentially means you are not responsible for the debts of your business. HMRC will not be able to take your house to pay off company debt unless you have personally guaranteed payments, such as a bank loan or rent agreement.
Can HMRC Take Your House to Pay for Company Debt?
The short answer is no. If you run a Limited Company, HMRC cannot take your house to pay for company debt.
We know how stressful it can be to run a Limited Company which is struggling. There’s so much to worry about, from demanding creditors to unpaid tax bills. Before you know it, you can find yourself in mountains of debt and not see a way out.
Like most directors, you will undoubtedly have put a lot of time and effort into establishing your business. That will make it especially difficult for you to admit there is no possibility of returning it to profitability.
If you think your Limited Company is in trouble, there are specific steps you will need to take to retain your limited liability.
For example, if you’re found guilty of wrongful conduct, you’ll automatically become personally liable for any debts accumulated by your company. This is something that catches out directors more often than you might think.
If your business failing is a certainty, you will become personally liable if you continue to trade.
To avoid any personal liability, you must prove that you believed within reasonable doubt that your business could be saved.
This includes doing everything within your power to minimise potential losses to creditors up to the point of closure.
Even if you decide to liquidate your Limited Company using a Creditors Voluntary Liquidation (CVL), a director’s house is usually in their own name.
In this situation, HMRC will not be able to seize your home to recover your company’s tax debts. The only exception will be if the property is owned by the limited company.
HMRC could therefore enforce Compulsory Liquidation to force the sale of the property to settle any outstanding debts.
What Can HMRC Take for Company Debt?
The Taking Control of Good Regulations permits Enforcement Officers (also known as HMRC Field Officers) to enter your business premises.
They can then list assets or goods for potential sale equivalent to the debt value and the cost of enforcement.
These assets are listed on a Controlled Goods Agreement, which you will be asked to sign. Any goods on that list will remain on your premises but under the control of HMRC, which means you will not be able to sell or trade them.
Its powers of ‘distraint’ allow HMRC to remove goods and assets such as machinery, IT equipment, stock, and vehicles. These will then be taken to auction and sold off to settle any unpaid tax bills as well as costs for selling the items, such as advertising or auctioneer fees.
What Should You Do if You Can’t Pay the Tax Bill?
Several options are available if your Limited Company cannot pay its tax bill.
One of the most common is a Time To Pay (TTP) arrangement which offers a more affordable way to pay your debt owed to HMRC. It also allows you to spread your tax payments over a more extended period.
Remember that this option is only for viable and solvent companies. This could be your best option if your firm has a good compliance record with HMRC.
Another way to protect your business from legal action pursued by HMRC is to enter a Company Voluntary Arrangement (CVA). This will give you time to work out an alternative payment plan.
Final Notes On If HMRC Can Take Your House to Pay Company Debt
While your limited liability will prevent HMRC from taking your house to pay off your Limited’s Company’s debts, you must work with them to find a solution.
If your business is in debt and you need some advice, get in touch with the Future Strategy team today, and we can talk you through your options – including helping you work out a payment structure with HMRC.