While company has declared that it is under liquidation then all its assets will be eventually sold in order to make various payments to all its creditors. All the business activities will close down, and also its name will be removed from the Company house register.

Here, in this article we shall limit the discussion to what will happen to all tax debts in particular while company insolvency is under process. Can the tax debts be recovered from the company directors?

What can the tax office do for pursuing various tax debts?

The tax authorities have a number of options to pursue for all tax debts, which sometimes may or may not be exercised during the period while the company is under liquidation stage. Following are few things that tax authorities will do.

      1. Contact

To start with, the tax officials will simply contact the company directors and remind them about their outstanding tax debt. Either they may contact the company director through email or telephone or with the help of debt collection agencies.

      2. Garnishee notice

All these notices will be served to a 3rd party who holds money on behalf of the company. Therefore, often it will be banks of the company, who may receive all these notices. 

Usually, garnishee orders need court approval, but under the act of Tax Administration, the tax authority has also got a unique power and can issue such garnishee notices even without any court order received.

      3. Director penalty notice

Director penalty notice can also be served to all the directors of the company, that the company have outstanding amount for PAYG Withholding and also Superannuation Guarantee Charge payments. 

With this kind of notice, the company directors will be held personally responsible and liable for paying all tax debts that company must have paid within due date.

      4. Statutory demand

The tax authorities can also issue statutory demand notice under the corporation act’s section 459E to ask for the payment of their tax debt. 

If the company has received any statutory demand, then the company has to pay all the debts within 21 days before the tax authority can start the legal proceedings in the court to get the company fully wound up.

      5. Winding-up

Finally, the tax authority has got the option to apply to the court to get the company liquidated. 

What will the liquidator do?

When the company will be liquidated then a liquidator will be appointed either by the court or through certain agency, which is going to be responsible for realising all the company assets.

After doing that, the liquidator will try to distribute all the necessary payments to the creditors. Besides these, the main responsibilities of the liquidator will also be to carry out few other tasks that include:

  • Various dealing with any other outstanding contracts
  • To dispense all information to various creditors all throughout the process
  • Get the company name removed from the Companies House register  
  • Regularly interviewing all directors as part of investigation