Many directors lose their businesses by waiting too long to act, especially when facing HMRC debt. This real-life case study shows how quick action and the right advice can save a company, even when things seem impossible. Chris Worden from Director First shares the journey of a Scottish business owner who turned things around just in time.
- Director owed £200,000 to HMRC
- HMRC was about to issue a winding up petition
- Quick action and professional advice saved the business
- Pre-pack liquidation used to transfer assets legally
- Director kept his livelihood and mental health improved
The Situation: Facing HMRC Pressure
The director, based in Scotland, fell behind with VAT and PAYE, owing over £200,000 to HMRC. After failed time to pay arrangements and missed payments, HMRC began the debt collection process and prepared a winding up petition. The director, overwhelmed by fear and stress, initially ignored the problem.
Turning Point: Seeking Help
After watching a YouTube video by Chris Worden, the director realised the urgency of his situation. He made a five-minute call that changed everything, leading to professional support and a plan to save the business.
Assessing the Business
Despite the debt, the business was fundamentally sound, with a loyal customer base and consistent income. However, the HMRC debt was too large to manage through further payment plans.
Pre-Pack Liquidation: The Solution
A pre-pack liquidation was arranged, allowing the director to set up a new company and purchase the assets and goodwill of the old business. This process was carefully managed to ensure all valuations were independent and creditors were treated fairly.
Key Challenges
- Securing insurance for the new company
- Refinancing vehicles with little equity
- Ensuring all transactions were above board and independently valued
- Trading on under strict guidance to maximise returns for creditors
Scottish Insolvency: Why Speed Matters
In Scotland, once a winding up petition is filed, the process is stricter and faster than in England. There is no court date or negotiation—an insolvency practitioner is appointed on a set date, so acting quickly is vital.
The Outcome
The assets were sold to the new company for £11,000 plus VAT, as recommended by an independent agent. The old company was liquidated, writing off the HMRC debt. The new company started trading debt-free, saving jobs and the director’s livelihood.
Key Takeaways
- Don’t ignore HMRC letters or calls—act fast
- Professional advice can reveal solutions you may not know exist
- Pre-pack liquidation can save viable businesses if handled correctly
- Independent valuations and transparency are essential
- Chris Worden and Director First can help directors in similar situations
FAQs
- What is a pre-pack liquidation?
- A pre-pack liquidation is when a company’s assets are sold to a new company before the old company is formally liquidated, often allowing the business to continue under new ownership.
- Can HMRC really wind up my company?
- Yes, if you owe significant tax debts and fail to communicate or pay, HMRC can issue a winding up petition to close your business.
- Is the insolvency process different in Scotland?
- Yes, Scottish insolvency law is stricter and faster, with less opportunity to negotiate once a winding up petition is filed.
- What should I do if I can’t pay HMRC?
- Seek professional advice immediately. Options may include time to pay arrangements, negotiation, or insolvency solutions like pre-pack liquidation.
- How can Director First help?
- Director First, led by Chris Worden, offers free, impartial advice to directors facing HMRC pressure or insolvency threats.
Need urgent advice? Contact us today for a confidential, no-obligation chat about your options.
