Every year many directors are disqualified for alleged tax offences. Our brilliant disqualification team can help fight these claims and often get them dropped completely or the period of disqualification significantly reduced.
Our expert team have been defending directors from disqualification since 2002. We are the leading UK legal experts in this area of the law and offer a multi disciplinary approach to whatever your question is.
- Stephen Downie is a partner and heads up our director disqualification team. Stephen is dual qualified as both a solicitor (with higher rights) and is a qualified accountant with expertise in complex accounting and tax matters. What differentiates Francis Wilks & Jones from other solicitors is that Stephen was previously an Insolvency Examiner within the Insolvency Service, an accountant working within Insolvency Practitioner firms investigating directors’ conduct and – following qualification as a solicitor in 2006 – Stephen spent 5 years as solicitor for the Secretary of State and Official Receivers, managing director disqualification claims. For the last 10-15 years since joining Francis Wilks & Jones, Stephen has advised and assisted Directors in defending director disqualification claims and getting them permission to continue acting as a director despite disqualification.
- Andy Lynch is an expert on any HMRC issues and is able to assist on any complex tax related matters. Before joining FWJ, Andy spent 18 years at HMRC in the special investigations team and regularly defends directors and shareholders from a variety of claims.
- Doug McEvoy is an associate at FWJ with a wide range of disqualification expertise, most recently defending many directors from Bounce Back Loan and tax allegations.
Francis Wilks & Jones acted with great professionalism, responding quickly to my requirements, leading to an eventual withdrawal of the claim against me and my son. I am extremely grateful.
A client who approached us just two weeks before the trial of a large director disqualification claim against him and his son
Director Disqualification for tax offences
Case 1 – Director Disqualification for trading to detriment of HMRC
Director Disqualified for 7 years by Order of the Court.
The Banned Director caused The Insolvent Company to trade to the detriment of HM Revenue & Customs (HMRC) in respect of VAT from 07 September 2017 and in respect of PAYE/NIC from 22 May 2018 at the latest to 08 March 2019, the date the company ceased to trade.
VAT
- As at the date of cessation the liability due to HMRC in respect of VAT was £69,154
- The Insolvent Company submitted VAT returns to HMRC for the quarters 07/17 to 01/19 with a total liability of £47,246. The Insolvent Company failed to make the required payments in respect of these VAT returns.
- HMRC raised an assessment for the 04/19 in the amount of £2,005.
- As a result of The Insolvent Company failure to make the required payments to HMRC in respect of VAT HMRC raised surcharges for the quarters 07/17 to 01/19 totalling £7,087
- HMRC records show the last payment made by The Insolvent Company to HMRC in respect of VAT was on 18 July 2017. No further payments were made in respect of VAT after 18 July 2017.
PAYE/NIC
- HMRC records show that IC submitted all returns for the 2017/2018 and 2018/2019 with a total liability of £91,855.
- HMRC records show payments totalling £16, 891 were made in respect of the 2017/2018 and 2018/2109 tax years.
- At liquidation the liability due to HMRC in respect of PAYE/NIC for the 2017/2018 and 2018/2019 tax years was £49,440.
COMPARATIVE TREATMENT
- The company operated 2 bank accounts, a review of the first company bank account between 07 September 2017 and 08 March 2019, show receipts totalling £180,647 and payments out totalling £185,760
- Of the £185,760 paid out payments totalling £43,926 were made to trade creditors and £55,717 was paid as wages.
- A review of the second company bank account between 10 June 2018 and 08 March 2019, shows receipts totalling £453,870 and payments out totalling £452,900
- Of the £452,900 paid out payments totalling £300,258 were made to trade creditors and £97,376 was paid as wages.
- During the same period no payments were made from either bank account to HMRC in respect of VAT and payments totalling £16, 891 were made in respect of PAYE/NIC.”
Case 2 – Director Disqualification for trading to the detriment of HM Revenue & Customs
Director Disqualified for 2 years by a signed undertaking of the director.
The Disqualified Director caused or allowed The Insolvent Company to trade to the detriment of HM Revenue & Customs (HMRC) in respect of VAT, PAYE/NIC and Corporation Tax from 1 January 2017 and also to the Local Authority from 8 November 2016 resulting in total liabilities of £113,652 to HMRC (excluding surcharges, penalties and interest) and £38,806 to the Local Authority (excluding costs), at the date of his resignation on 29 January 2018. In that:
VAT
- The Insolvent Company filed VAT returns from quarter period ending 30/06/2015 through to 30/06/2017 and failed to pay the VAT returns when due from quarter period ending 31/03/2016 onwards.
- The Insolvent Company failed to maintain a Time to Pay Arrangement agreed with HMRC. Weekly payments of £1,250 were agreed, with the first payment made on 23/02/2017. The final payment was made on 28/07/2017. Payments made totalling £28,750 were allocated towards arrears in VAT for quarter period ending 30/06/2016 and 30/09/2016, resulting in these being paid in full, and part payment towards period ending 31/12/2016.
- The Insolvent Company made a payment of £8,000 on 22/06/2017 towards quarter period ending 31/03/2017.
- Sums remain outstanding for quarter period ending 31/12/2016, 31/03/2017 and 30/06/2017 totalling £66,002. Payment for quarter period ending 31/12/2016 was due on 07/02/2017.
- The Insolvent Company failed to submit any further returns resulting in HMRC raising an assessment for quarter period ending 30/09/2017 of £24,229.
- The outstanding VAT for quarter period ending 31/12/2016 to 30/09/2017 totals £90,231.
- No further payments were made towards these liabilities.
- As a result of The Insolvent Company’s failure to submit returns and make sufficient payments, surcharges of £15,143 remained outstanding at 29 January 2018.
PAYE/NIC
- Prior to 1 January 2017 PAYE/NIC of £1,652 was outstanding for tax year 2015/16.
- For tax year 2016/17 The Insolvent Company submitted RTI tax returns of £6,959, Employers Allowance of £1,377 was deducted and The Insolvent Company made payments of £3,805 towards this liability. £1,777 remained outstanding.
- For 9 months of tax year 2017/18 The Insolvent Company submitted RTI tax returns of £7,778 and Employers Allowance of £2,179 was deducted. No payments were made towards this liability and £5,599 remained outstanding.
- The outstanding liability for PAYE and NIC for tax year 2015/16, 2016/17 and 2017/18 totals £9,027.
Corporation Tax
- The Insolvent Company submitted a Corporation Tax return for accounting period ending 31/12/2015 of £5,135, which was due on 01/01/2017. Of this £5,135 was for S419 tax in respect of the outstanding Directors Loan Account of £20,539.
- The Insolvent Company submitted a Corporation Tax return for accounting period ending 31/12/2016 of £9,259. Of this £7,813 referred to S455 tax in respect of the outstanding Directors Loan Account of £24,043.
- The Insolvent Company failed to submit any further Corporation Tax returns.
- No payments were made towards these liabilities.
- The outstanding Corporation Tax liability for accounting periods ending 31/12/2015 and 31/12/2016 totals £14,394.
- The Insolvent Company incurred penalties of £200 for accounting period ending 31/12/2016 that remained outstanding at the date of liquidation.
Local Authority
- The Insolvent Company incurred non-domestic business rates prior to 1 January 2017 and from 08/11/2016 to 03/2017 £10,784 remained outstanding.
- The Insolvent Company incurred business rates of £28,022 for the financial year commencing April 2017 and £28,022 remained outstanding.
- The total business rates outstanding for the period The Disqualified Director was a director totalled £38,806 owed to the Local Authority.
- The Insolvent Company incurred costs of £194 for this period that remained outstanding.
Comparable Treatment
- From 31/12/2016 to liquidation the total creditors had decreased by £72,534, the amount owed to HMRC had increased by £164,147 and the amount owed to the Local Authority has increased by £55,575.
- Bank statements show during the period 01/01/2017 to 29/01/2018, £1,010,399 was paid out of the company bank account of which £717,676 was paid towards creditors, (£412,775 trade creditors, £304,901 wages), £32,630 withdrawn in cash and £53,207 in unknown transactions. £121,067 was paid to the landlord of which the Banned Director was a director. £40,577 was paid to HMRC and £2,938 was paid to the Local Authority.
- At liquidation the debt owed to HMRC was £213,364 (adjusted for cessation of trading) whilst the liability to other creditors was £70,976, of which £70,443 was claimed by the Local Authority.
Case 3 – Director Disqualification for tax abuse and trading to the detriment of HM Revenue & Customs
Director Disqualified for 8 years by an undertaking agreed by the director.
The Disqualified Director caused the Insolvent Company to trade to the detriment of HM Revenue & Customs (HMRC) by operating a policy of unfair discrimination in respect of Value Added Tax (VAT) for the period from 7 October 2017 to the 23 October 2019 (the date of liquidation) and also in respect of Corporation Tax (CT) for the period from 1 September 2017 to 23 October 2019 . As at the date of liquidation there was an outstanding liability of £463,114 in respect of VAT and CT, in that:-
- The Insolvent Company submitted late VAT returns for quarter ending August 2017 to February 2019, resulting in VAT liabilities of £303,725 with surcharges of £38,535.
- No payments were made against these labilities.
- VAT became due for payment between 1 August 2017 and 23 October 2019.
Corporation Tax
- The Insolvent Company filed a CT return detailing a liability of £42,415 with interest of £2,098 for the period ending 31 November 2016, which was due for payment on 1 September 2017.T
- The Insolvent Company filed a CT return detailing a liability of £74,820 with interest of £1,521, for period ending 31 November 2017, which was due for payment on 1 September 2018
- No payments were made against these liabilities.
Comparative Treatment
- The Insolvent Company financial accounts for the year ending 31 November 2017, provided by the company accountant and filed at Companies House, record trade creditors as owed £53,519 and HMRC owed £112,503 for VAT and £143,255 for other taxes & social security. A Directors Loan Account (DLA) of £214,955 was also recorded as outstanding. On 23 October 2019 the Insolvent Company went into liquidation, HMRC claimed at least £463,114 in respect of VAT and CT, and other creditors are owed £13,181. The company accountants prepared accounts dated 30 November 2019 which continued to indicate a DLA of £214,955.
- Analysis of company account bank statements between 13 December 2017 and 15 November 2019 show that the Insolvent Company received credits to the account of £2,839,356.49. Payments totalling £203,669 can be identified as being paid to HMRC. A total of at least £847,713.17 was expended from the Insolvent Company account for the benefit of the director and his wife. A WO07 filed at Companies House by the liquidator indicates an outstanding Directors Loan Account balance of £809,662 as at 21 May 2021.
Case 4 – Director Disqualification for trading to the detriment of HM Revenue & Customs and creditor losses
Director Disqualified for 10 years by a director signed undertaking.
The Banned Director caused The Insolvent Company to trade to the detriment of HM Revenue & Customs (HMRC) in respect of VAT by failing to make payments as and when they fell due whilst continuing to make payments to other creditors from at least 07 February 2020 to cessation of trade on 13 October 2021. Furthermore, he caused The Insolvent Company to trade to the detriment of HMRC in respect of PAYE and NIC by failing to make sufficient payments whilst continuing to make payments to other creditors from 01 January 2020 to 13 October 2021, in that:
- The insolvent company registered for VAT with HMRC on 12 December 2017.
- According to HMRC Ledgers, The Insolvent Company submitted VAT returns to HMRC for the quarters ending 31 December 2019 to 31 July 2021 (which fell due for payment from 07 February 2020 onwards) They detailed an amount due to HMRC of £49,247 with surcharges of £2,378. The ledger details that 4 payments and a VAT reclaim amounting to £4,862 were set against this liability with the last payment of £1,469 being made on 02 September 2020, leaving a net liability of £46,764.
- HMRC Ledgers also detail assessment raised by HMRC for the quarter ended 31 October 2021 of £7,593 with a surcharge of £1,139. An Officers Assessment for £6,281 was also issued on 29 January 2020. The ledger details no payments in respect of these assessments.
- He was aware of The insolvent company’s increasing VAT liabilities as VAT returns were submitted to HMRC detailing the liabilities and conversations were held between him and HMRC during this period.
- HMRC’s claim for outstanding VAT in the Liquidation details a total VAT liability of £62,344 and, surcharges amounting to £3,517 but covers a greater period of 01 July 2019 to Liquidation.
- According to HMRC’s ledgers, The Insolvent Company deducted £93,282 in PAYE, NIC and Student Loan deductions between 01 January 2020 and 13 October 2021.
- In this period, The Insolvent Company made 5 payments totalling £7,500 and received employment allowances totalling £4,000 against the amount outstanding leaving a liability of £81,782 for PAYE, NIC and Student Loan deductions.
- HMRC’s claim in the Liquidations details a liability of £96,758 for PAYE, NIC and Student Loan deductions for the tax years 2019/2020, 2020/2021 and 2021/2022.
Comparative Treatment
- Between 01 September 2020 and 29 October 2021 bank statements show payments out of The Insolvent Company bank account totalling £512,647. Of that amount £124,736 was paid to trade creditors, £217,765 was paid for employee wages and pension contributions, £111,702 was paid to him, £51,148 was paid to a former director and payments of £5,219 towards the company’s PAYE liability. Bank statements do not show any payments being made to HMRC towards the company’s VAT liability.
- The Insolvent Company last prepared accounts show that for the years ended 31 October 2019 and 2020 show its indebtedness to trade creditors stood at £12,823 and £12,697 respectively, indebtedness to other creditors stood at £26,368 and £23,095 respectively and its indebtedness to HMRC stood at £25,745 and £77,002 respectively.
- At liquidation, The Insolvent Company had liabilities outstanding of £15,805 to trade creditors, £56,172 to the bank and at least £168,524 to HMRC in respect of VAT (£65,860), PAYE (96,758) & Corporation Tax (£5,905).
Case 5 – Director Disqualification for trading to the detriment of HM Revenue & Customs and non payment of VAT
Director Disqualified for 9 years by Order of the Court.
The Disqualified Directors caused The Insolvent Company to trade to the detriment of HM Revenue & Customs in respect of VAT between 7 December 2017 and the date of Liquidation, 20 November 2020, in that;
- The Insolvent Company was registered for VAT from 5 September 2014;
- From period 10/17 until Liquidation VAT liabilities increased from £0 to £83,631.65;
- The Insolvent Company submitted VAT returns for 6 periods (10/17 to 01/19) totalling £56,441.42;
- No returns were filed for periods 04/19 until Liquidation;
- The Insolvent Company has made payments to HMRC in respect of VAT of £4,000 during this period.
Comparative Treatment
Between 7 December 2017 and Liquidation, £577,008.72 was paid into IC bank account and £587,333.81 was paid from The Insolvent Company bank account of which £4,000 was paid to HMRC with the rest being used for payments to all other classes of creditor and staff wages.
Case 6 – Director Disqualification for trading to the detriment of HM Revenue & Customs and non payment of VAT
Director Disqualified for 3 years by a director signed undertaking.
The Banned Director failed to ensure that The Insolvent Company submitted VAT returns when due to HM Revenue & Customs (HMRC) and caused The Insolvent Company to trade to the detriment of HMRC from 7 May 2019 to 04 May 2021 resulting in an estimated VAT liability in the sum of at least £55,017, in that:
- The Insolvent Company incorporated on 10 May 2018 and on 20 September 2018 completed VAT registration paperwork for HMRC stating an estimated turnover of £100,000.
- Only one VAT return was made, for period 12/18 on 10 April 2019 for £572, which was paid. No further VAT returns were made to HMRC.
- Assessments were made for periods 03/19 to 9/19 totalling £2,154 which were paid.
- Assessments were made for periods 12/19 to 03/21 totalling £6,653 for which no payments were made.
- Therefore, overall, returns and assessments for The Insolvent Company from 10.05.2018 to 04.05.2021 totalled £9,379 of which £2,726 was paid.
- An analysis of The Insolvent Company’s Accounts at Companies House and Bank records shows that its turnover in YE 31 May 2019 was £264,164, its turnover in YE 31 May 2020 was £362,168 and YE 04 May 2021 (Liquidation) was £67,611. A total turnover of £693,943. Therefore, on this basis, Output VAT at 20% due from The Insolvent Company was £115,657.
- The statement of affairs for The Insolvent Company lists HMRC as a creditor for VAT in the sum of £55,017.
Analysis of creditors for the company shows the amount owing to HMRC has increased year on year from £43,455.73 for YE 31.05.19 to £59,146 at liquidation. In the same period the amount owing to other creditors was £3,456 in prepared accounts for YE 31.05.19 rising to £9,942 at liquidation.
Case 7 – Director Disqualification for VAT non payment and trading to the detriment of HM Revenue & Customs
Director Disqualified for 4 years by Order at trial.
The Disqualified Director caused The Insolvent Company to trade to the detriment of HM Revenue & Customs (HMRC) from 22 November 2016 in respect of worker taxes causing liabilities of at least £50,080, and from 07 April 2017 in respect of Value Added Tax (VAT), causing liabilities of at least £208,756, in that:
Worker taxes
- Between 22 November 2016, when the return for the month ending 05 November 2016 fell due, and the date of liquidation, Pay As You Earn tax (PAYE) amounting to £76,088 fell due and Construction Industry Scheme tax (CIS) amounting to £31,508 fell due on returns submitted
- From 22 November 2016, payments totalling £16,559 were made. Of this sum, £12,412 was in respect of CIS tax due
- HMRC submitted a proof of debt to the Liquidators which records PAYE/CIS debt totalling £50,080
- At liquidation the company was liable to pay at least £50,080 in respect of PAYE/CIS
VAT
- Between 07 April 2017, when the return for the quarter ending February 2017 was due, and the date of liquidation:
- VAT totalling £276,448 fell due on returns submitted and one HMRC assessment for the quarters ending February 2017 to August 2018
- Payments totalling £67,692 were made and credited to the same VAT quarters
- At liquidation the company was liable to pay at least £208,756 in respect of VAT
Different Treatment
- The filed accounts to 30 December 2016 records HMRC as a creditor amounting to £122,286 and £850 in respect of other creditors
- The statement of affairs within the liquidation records HMRC as a creditor amounting to £313,491 and £7,500 in respect of other creditors
Case 8 – Director Disqualification trading to the detriment of HM Revenue & Customs + PAYE / CIS offences
Director Disqualified for 3 years by an undertaking agreed by the director.
The Director Disqualified caused The Insolvent Company to trade to the detriment of HMRC in respect of PAYE/CIS from 22 November 2019 and in respect of VAT from 7 May 2020 until the date of liquidation on 16 November 2020. In that:
- Monthly PAYE returns were submitted for periods ending 5 September 2019, due by 22 October 2019, to 5 Sept 2020 showing that PAYE totalling £47,279 was due. A Payment on Account of £4,000 was made in respect of these periods that fully paid the period ending 5 September 2019, and part paid the period ending 5 October 2019, which was due for full payment by 22 November 2019. All other monthly periods remain outstanding in full.
- Monthly CIS returns were submitted for periods ending 5 January 2020, due by 19 January 2020, to 5 April 2020 showing sums due of £100,880. Nothing was paid towards these periods. The Insolvent Company failed to submit CIS returns for the period ending 5 December 2019, and for the periods ending 5 May 2020 to 5 October 2020 and HMRC raised assessments of £50,478.28. Nothing was paid towards these assessments.
- The Insolvent Company was registered for VAT from 1 January 2020 but failed to submit VAT returns for the VAT period ending 03/20, due by 7 May 2020, to the period ending 09/20. HMRC raised assessments totalling £16,174 for these VAT periods. Accounting records maintained by The Insolvent Company showed the sums outstanding for these three VAT periods totalled £60,000 but HMRC were not informed of these sums. The Insolvent Company did not make any payments towards the VAT liability.
- Bank statements for the period from 22 November 2019 show payments from the account of £1,646,509, of which £0 was paid to HMRC
At liquidation, HMRC have claimed a total of £238,073 (£219,774 in respect of PAYE/CIS and £16,174 in respect of VAT). This total includes the figures above, plus an additional £2,125 in interest, penalties and surcharges, and £21,137 that became due after The Insolvent Company had entered liquidation and which is not being criticised. The only other creditor is the bank for £49,901
Case 9 – Director Disqualification for trading to the detriment of HM Revenue & Customs and non payment of VAT, PAYE + NIC
Director Disqualified for 3 years by a signed undertaking of the director.
The Disqualified Directors failed to ensure that The Insolvent Company made payments in full, as and when due, to Her Majesty’s Revenue and Customs (‘HMRC’) in respect of VAT, PAYE and NIC, and caused The Insolvent Company to trade to the detriment of HMRC from 07 January 2019 resulting in total liabilities owed to HMRC, the majority creditor at liquidation of £319,936 inclusive of charges and interest. In that:
- Between the periods ending December 2018 and September 2020 The Insolvent Company incurred VAT liabilities of £240,288, based on returns submitted to and assessments raised by HMRC, inclusive of surcharges and penalties. The Insolvent Company made one payment of £389 towards these liabilities on 09 December 2019, leaving an outstanding liability at liquidation of £239,899.
- For tax years ending April 2020 and April 2021, HMRC have submitted claims for outstanding PAYE and NIC liabilities owed by The Insolvent Company totalling £74,276, based on returns submitted to HMRC, inclusive of penalties. The Insolvent Company made payments totalling £15,061 towards its PAYE liabilities for the year end April 2020 with the last payment being made on 24 December 2019 for £5,497. The only other PAYE payments made by The Insolvent Company during this period were three payments made between May 2019 and August 2019 totalling £23,400 which paid liabilities for the tax year ending April 2019.
- The Insolvent Company’s prepared financial statements for years ending 31 March 2018 and 31 March 2019 record total liabilities owed to creditors of £7,500 in both years.
- Statements for The Insolvent Company’s bank account for the period 01 January 2019 to 20 August 2020 record payments into the account totalling £818,774 and debits from the account totalling £803,155. In the same period, The Director Disqualified and connected parties received net payments totalling £65,450 and HMRC received payments totalling £46,009.
HMRC have claimed £319,936 in The Insolvent Company’s liquidation in respect of VAT, PAYE, NIC, penalties and interest. The only other claims received by the liquidator are for £402 in respect of outstanding utility debt and a claim by The Disqualified Directors of £220,000 which has not been evidenced.
Case 10 – Director Disqualification for non payment of VAT and Corporation Tax & trading to the detriment of HM Revenue & Customs
Director Disqualified for 3 years by a signed undertaking of the director.
Between 08 January 2018 and 30 April 2021, The Banned Director, caused or allowed The Insolvent Company to trade to the detriment of HM Revenue & Customs (HMRC) by failing to ensure The Insolvent Company made payments as and when due in respect of VAT and Corporation Tax, in that:
VAT
- As at 08 January 2018, the outstanding balance on The Insolvent Company VAT account was £38,573. From this date, The Insolvent Company VAT liability for the 11/17 VAT period (included in the balance) became overdue for payment;
- The Insolvent Company submitted monthly VAT returns up to and including the 04/21 VAT period. Between 12/17 and 04/21 VAT periods, £285,104 of VAT was due for payment. In addition, further liabilities totalling £30,884 became due in the period in respect of an officer assessment, surcharges, penalties and interest, making a total liability due for the period of £315,988;
- In the period, payments totalling £95,066 were made towards The Insolvent Company VAT liability. In addition, the sum of £52,771 was credited to the VAT account from The Insolvent Company CIS account in respect of CIS deductions suffered by The Insolvent Company in the 18/19 and 19/20 tax years;
- As at 30 April 2021, the balance of IC VAT account had increased by £168,150 to £206,723, which remained outstanding as at the date The Insolvent Company entered liquidation.
Corporation Tax
- As at 08 January 2018, The Insolvent Company had an outstanding Corporation Tax (CT) liability of £44,644, relating to the 2015/16 financial year;
- IC CT liability for 2016/17 was £24,629 and was due for payment by 31 May 2018;
- The Insolvent Company reported a loss for 2017/18 and 2019/20. The Insolvent Company liability for 2018/19 was £4,371 and due for payment by 31 May 2020;
- The Insolvent Company made no payments towards its CT liabilities in the period, leaving The Insolvent Company unpaid CT liability at £73,644.
Comparative Treatment
- The Insolvent Company bank statements record that between 08 January 2018 and 30 April 2021, the sum of £1,855,889 was credited to the bank accounts used by The Insolvent Company by its sole client;
- Of this sum, £424,633 was paid to, or for the benefit of, her and The Insolvent Company other director, compared to only £95,066 to HMRC;
- On 26 October 2019, a winding-up petition was presented against The Insolvent Company by HMRC. Despite this, compared to the period between 08 January 2018 and 25 October 2019, the value of payments to, or for the benefit of, her and The Insolvent Company other director went up (£252,251 compared to £172,382), whilst the value of payments to HMRC went down (£17,722 compared to £77,344);
In liquidation, HMRC was owed £282,166 out of total liabilities, and a deficiency, of £284,751.
Case 11 – Director Disqualification Case for non payment of PAYE and VAT and trading to the detriment of HM Revenue & Customs
Director Disqualified for 7 years by a director signed undertaking.
From at least 22 November 2019 to 20 May 2021, date of liquidation, The Banned Director caused The Insolvent Company to trade to the detriment of HMRC in respect of Pay As You earn (PAYE) and Value Added Tax (VAT) in that:
PAYE:
- In respect of the tax year 2019/2020, Real Time Information (RTI) was submitted by the company and the months up to Month 6 were paid. The RTI from Month 7, which was due by 22 November 2019 disclosed liabilities totalling £17,680, to Month 12. No payments were made, resulting in £17,680 remaining outstanding at liquidation.
- In respect of the tax year 2020/2021, RTI was submitted by the company for Months 1 to 12, disclosing liabilities totalling £30,430. The Annual Employers Allowance of £4,000 was due. No payments were made and accruing interest of £1,786 was added, resulting in outstanding liabilities of £28,216.
- The liabilities totalling £45,896 remained outstanding at liquidation.
VAT:
- The Disqualified Director was the sole appointed director during this time and registered The Insolvent Company for VAT from 25 February 2019, following which VAT returns were filed by The Insolvent Company up to the VAT period ended 31 January 2020, and the VAT due up to VAT period ended 31 July 2019 was paid in full.
- The VAT returns for the 2 VAT periods ending 31 October 2019 and 31 January 2020, disclosed liabilities totalling £27,991. One payment of £3,500 was made, resulting in outstanding liabilities totalling £24,491.
- In the absence of any further VAT returns, HMRC raised assessments for the VAT periods ended 30 April 2020, 31 July 2020, 31 October 2020 and 31 January 2021, totalling £69,754 and a surcharge of £936 for the period to 31 January 2021. No further payments were made and the resulting liability of £70,690 remained outstanding at liquidation.
- A further payment of £2,098 was made to HMRC on 28 April 2021, and while this payment is not disclosed in any of HMRCs ledgers, and it’s therefore not possible to say whether this was due to be allocated to the VAT liabilities, on the basis of this not being allocated to any other HMRC liabilities. Therefore the total outstanding VAT is £93,083.
Comparative Treatment:
- An analysis of The Insolvent Company bank statements for the period from 22 November 2019 to 20 May 2021 discloses that sums totalling £685,615 were expended. Of this sum, payments totalling £90,820 were paid to Disqualified Director, £12,205 were paid to a connected company, £14,385 in unexplained transactions, £2,951 of which were cash withdrawals. While payments totalling £199,282 were made to employees, £47,765 to the landlord, and £309,968 paid for Trade & Expenses, HMRC only received 2 payments totalling £5,598.
- At liquidation, the claims received were from HMRC, which has been restricted to £141,077 following an analysis, 3 Trade & Expenses creditors totalling £37,887 and the Bank of Scotland of £50,000 in connection with the BBL liability which arose on liquidation.
Case 12 – Director Disqualification for trading to the detriment of HM Revenue & Customs – PAYE, NIC and VAT liability
Director Disqualified for 4 years by an undertaking agreed by the director.
The Disqualified Director caused and/or allowed The Insolvent Company to trade to the detriment of HM Revenue and Customs (HMRC) in respect of Pay As You Earn (PAYE) and National Insurance Contributions (NIC) from 22 July 2015, and in respect of Value Added Tax (VAT) from 07 October 2015, in that:
Pay as You Earn
- The PAYE liability for the period ending 05 July 2015 became due for payment on 22 July 2015.
- Between 22 July 2015 and 11 December 2018, the date of liquidation, The Insolvent Company incurred a PAYE and NIC liability, including interest and penalties, of at least £61,801, against which payments of £5,274 were made.
- At the date of liquidation, the outstanding liability in respect of PAYE and NIC was £58,194.
Value Added Tax
- At 07 October 2015, The Insolvent Company was in credit for VAT in the sum of £172.
- The VAT liability for the VAT period ending 31 August 2015 became due for payment on 07 October 2015.
- Between 07 October 2015 and 11 December 2018, the date of liquidation, The Insolvent Company incurred a VAT liability, including interest and penalties, of at least £57,065 against which no payments were made.
- At the date of liquidation, the outstanding liability in respect of VAT was £56,892.
Differential Treatment
- The Financial Statements for the year ending 30 June 2016 show amounts owed to HMRC for £8,714 and Group Undertakings for £52,109.
- The Statement of Affairs shows the amounts due to HMRC had increased to £113,204 whilst there is no liability showing for Group Undertakings.
- An analysis of the bank account for the period 22 July 2015 to the date of liquidation show payments received into the account for the sum of £1,305,844 of which payments made to associated companies totalled at least £470,212. During the same period the bank account analysis shows payments to HMRC totalling £12,372.
- An analysis of the HMRC ledgers shows payments being received by HMRC for the period of the allegation of £5,274.
Case 13 – Director Disqualification Case for non filing of VAT and Corporation tax returns
Director Disqualified for 4 years by a signed undertaking of the director.
The Disqualified Directors failed to ensure that all income received by The Liquidated Company was disclosed to HM Revenue & Customs (‘HMRC’) and as a consequence inaccurate VAT returns were filed from at least January 2017 to August 2019 and inaccurate Corporation Tax (‘CT’) returns were filed for the years ending 30 November 2017 and 2018. HMRC raised VAT and CT assessments totalling £161,102, which remain unpaid. In that:
HMRC commenced an investigation into The Liquidated Company in November 2018;
As a result it was found that online orders taken were not processed through the till and therefore income had been under-reported to HMRC;
HMRC issued an Officer’s Assessment for VAT of £106,808 arising for the quarters ended January 2017 to August 2019;
In addition CT of £54,294 was assessed as due on the additional income for the years ended 30 November 2017 to 2019;
HMRC determined that this behaviour was ‘careless’;
No payments were made and HMRC was the majority creditor in the liquidation.
Case 14 – Director Disqualification for trading to the detriment of HM Revenue & Customs and non payment of VAT & NIC
Director Disqualified for 2 years by an undertaking agreed by the director.
The Disqualified Directors caused The Insolvent Company to trade to the detriment of HMRC in respect of PAYE/NIC and VAT from 22 February 2019 at the latest to 20 March 2020. In that:
- The bust company submitted PAYE/NIC returns to HMRC for the periods between that ending 5 February 2019, first due for payment on 22 February 2019, and that ending 5 February 2020, which declared sums due to HMRC totalling £191,465 Payments totalling £50,852 were made to HMRC against these liabilities.
- The liquidated company submitted returns to HMRC for the periods between that ending 30 April 2019 and that ending 31 January 2020 in respect of its liabilities for Value-Added Tax (‘VAT’), which declared VAT due to HMRC totalling £120,527. Payments totalling £26,979 were made to HMRC against these liabilities.
- In the period 22 February 2019 to 20 March 2020 a sum of £1,724,066 was paid from the company bank accounts, including £132,801 to the directors and associated parties
- In the same period £77,831 was paid to HMRC.
Total liabilities listed on the statement of affairs were £442,567, of which £298,076 was declared as outstanding to HMRC in respect of PAYE/NIC and VAT.
Case 15 – Director Disqualification for trading to the detriment of HM Revenue & Customs for VAT, NIC and corporation tax non payment
Director Disqualified for 3 years by a director signed undertaking.
In the period from 08 April 2018 (when payment for Value Added Tax (VAT) fell overdue) to cessation of trading in November 2019 The Disqualified Directors caused The Insolvent Company to trade to the detriment of HM Revenue and Customs (HMRC) in respect of VAT, and from 23 April 2018 in respect of Pay As You Earn tax/National Insurance Contributions (PAYE/NIC), and from 02 September 2018 in respect of Corporation Tax (CT), resulting in unpaid liabilities of £37,911 at liquidation.
VAT
- The Insolvent Company had VAT liabilities totalling £12,456 in respect of quarter ended 28 February 2018, due for payment by 07 April 2018, but failed to make payment as required;
- The Insolvent Company incurred further VAT liabilities totalling £14,845 in the period to quarter ended 31 August 2019, against which The Insolvent Company made payments totalling £3,166;
PAYE/NIC
- The Insolvent Company had PAYE/NIC liabilities totalling £302 in respect of the tax month ended 05 April 2018, due for payment by 22 April 2018, but failed to make any payment against these liabilities;
- The Insolvent Company incurred further PAYE/NIC liabilities totalling £5,660 from 23 April 2018 to the cessation of trading, but failed to make any payment against these liabilities;
Corporation Tax
- The Insolvent Company had CT liabilities totalling £7,814 in respect of period ended 30 November 2017, due for payment by 01 September 2018, but failed to make any payment against these liabilities;
Comparative Treatment
- The Insolvent Company’ total outstanding liability to HMRC at liquidation, including sums that had accrued prior to 08 April 2018, was £58,635. The Insolvent Company had two other outstanding creditors, who were owed a total of £3,846;
- The Insolvent Company’ bank statements show the company made payments totalling £74,911 in the period from 08 April 2018 onwards, but only £3,166 was paid against The Insolvent Company’ accumulating tax arrears.
Case 16 – Director Disqualification for trading to the detriment of HM Revenue and Customs – PAYE / NIC and VAT
Director Disqualified for 7 years by Order of the Court.
The Disqualified Directors caused and/or allowed The Insolvent Company to trade to the detriment of HM Revenue and Customs (HMRC) in respect of Pay As You Earn (PAYE) and National Insurance Contributions (NIC) from 22 March 2016, and in respect of Value Added Tax (VAT) from 07 April 2016, until 01 October 2018, in that:
Pay as you Earn
- At the date The Disqualified Directors became a director of The Insolvent Company the PAYE and NIC liability was £7,159.
- The PAYE liability for the period ending 05 March 2016 became due for payment on 22 March 2016.
- Between 22 March 2016 and 01 October 2018, the date of The Disqualified Directors resignation, The Insolvent Company incurred a PAYE and NIC liability, including interest and penalties, of at least £52,347, against which payments of £4,037 were made.
- At 01 October 2018, the date of The Disqualified Directors resignation, the outstanding liability in respect of PAYE and NIC was £55,470.
Value Added Tax
- On 01 March 2016, The Insolvent Company had a liability to HMRC in respect of VAT for the sum of £7,746.
- The VAT liability for the period ending 28 February 2016 became due for payment on 07 April 2016.
- Between 07 April 2016 and 01 October 2018, The Insolvent Company incurred a VAT liability, including interest and penalties, of at least £47,494 against which no payments were made.
- At 01 October 2018, the date of The Banned Director’s resignation, the outstanding liability in respect of VAT was £55,240.
Differential Treatment
- The Financial Statements for the year ending 30 June 2016 show amounts owed to HMRC for £8,714 and Group Undertakings for £52,109.
- An analysis of the HMRC ledgers shows that at 01 October 2018, the date of The Disqualified Directors resignation, the outstanding liability in respect of HMRC was £110,710.
- An analysis of the bank account for the period 22 March 2016 to 01 October 2018 show payments received into the account for the sum of £1,103,372 of which payment made to associated companies totalled at least £415,612. During the same period the bank account analysis shows payments to HMRC totalling £11,136.
- An analysis of the HMRC ledgers shows payments being received by HMRC for the period of the allegation of £4,037.
Case 17 – Director Disqualification Case for director loan account abuse
Director Disqualified for 4 years by an undertaking agreed by the director.
Between 01 February 2018 and 31 January 2019 The Disqualified Directors failed to ensure that The Insolvent Company met its financial commitments as regards to Corporation Tax (‘CT’) whilst withdrawing funds of £699,400 to the detriment of HMRC and for the benefit of the directors under a Directors Loan Account (‘DLA’) in that:
Corporation Tax
- A Corporation Return was submitted for the financial year ending 31 January 2017, which declared a CT liability of £48,471, due to be paid no later than 01 November 2017. Only one payment of £2,167 was made, on 26 April 2019, with £46,304 outstanding at liquidation, together with penalties charged of £400.
- A Corporation Return was submitted for the financial year ending 31 January 2018 which declared a loss of £1,501, with consequently no CT due to be paid, and providing an allowance of £300 to be set off against Corporation Tax for other periods.
- A Corporation Return for the financial year ending 31 January 2019 declared a CT liability of £278,385, of which £87,416 related to tax on profits declared, and £190,969 was a charge based on a DLA incurred during the period. No payment has been made against the liability.
- In total therefore £327,441 is owed in respect of CT at liquidation (including penalties of £400 and interest of £2,652)
Different Treatment
- Accounts for the financial years ending 31 January 2017 and 31 January 2019 declared total sales of £4,450,000 (there were no sales for year ending 31 January 2018), with cumulative net profits before tax for the three years totalling £702,038.
- Accounts for the financial year ending 31 January 2018 stated that the sum of £111,804 was owed by IC to the directors under a Directors Current account. The sum of £48,471 in respect of CT for the financial year ending 31 January 2017 remained outstanding
- During the 12 month period ending 31 January 2019, accounts show that the £111,804 Directors Current account was repaid to the directors. In addition, withdrawals against a DLA were made by the directors, resulting in an amount owed to The Insolvent Company of £587,596 by 31 January 2019. During the 12 month period, whilst funds totalling £699,400 were withdrawn by the directors, no payments were made against the outstanding CT liability.
- On 01 February 2019, after having withdrawn funds totalling £699,400, IC entered a Time to Pay agreement with HMRC in respect of CT due for the financial year ending 31 January 2017. One payment of £2,167 was made.
Creditors in the liquidation are owed £334,641, of which £327,441 is owed to HMRC.
Case 18 – Director Disqualification Case for failure to meet HMRC financial commitments and Bounce Back Loan issues
Director Disqualified for 5 years a director signed undertaking.
Between 01 April 2019 and 21 September 2020 when the company entered liquidation, The Disqualified Directors failed to ensure that the Liquidated Company met its financial commitments as regards to Corporation Tax (CT), and caused the company to continue trading whilst withdrawing funds for the benefit of himself. As a result the company became unable to meet its financial commitments to HMRC as and when they became due. In that:
The Liquidated Company was incorporated and commenced trading on 08 July 2015 as a consultancy providing IT services. The Banned Director was the sole director until the company entered liquidation 21 September 2020;
CT is due on a company’s profits. A return (CT600) must be filed within 12 months of the end of the accounting period. If the profits of the company are less than £1.5million, the CT should be paid 9 months and 1 day after the end of the accounting period;
The CT return for the period 01 August 2017 to 30 June 2018 was submitted to HMRC on 11 January 2019. It showed the amount due was £12,653,which was due for payment by 01 April 2019. No payment was made and this remains outstanding at liquidation;
The CT return for the year ended 30 June 2019 was submitted to HMRC on 10 February
- It showed that CT of £12,493 was due for payment by 01 April 2020. No payments were made and this debt remains outstanding at liquidation;
- The Bounce Back Loan was obtained on 07 May 2020, none of it was applied to CT;
- The bank statements show payments made to the director after 01 April 2019, totalled £126,706 with a further £34,522 in payments which appear to be personal spending;
- In the statement of affairs signed by The Director Disqualified on 14 September 2020, the director disclosed a directors loan account of £18,573 which he owed to the company. This was the figure shown as outstanding in The Liquidated Company’s year-end accounts to 30 June 2019;
- The available bank statements show that a total of £5,725 was paid to HMRC in 20 payments, made between 18 June 2019 and 22 November 2019. These payments were all in respect of a Time to Pay agreement relating to VAT.
- The Director Disqualified caused The Insolvent Company to trade to the detriment of HMRC in respect of PAYE/NIC and VAT from 22 February 2019 at the latest to 20 March 2020. In that:
- The company submitted PAYE/NIC returns to HMRC for the periods between that ending 5 February 2019, first due for payment on 22 February 2019, and that ending 5 February 2020, which declared sums due to HMRC totalling £191,465 Payments totalling £50,852 were made to HMRC against these liabilities.
- The company submitted returns to HMRC for the periods between that ending 30 April 2019 and that ending 31 January 2020 in respect of its liabilities for Value-Added Tax (‘VAT’), which declared VAT due to HMRC totalling £120,527. Payments totalling £26,979 were made to HMRC against these liabilities.
- In the period 22 February 2019 to 20 March 2020 a sum of £1,724,066 was paid from the company bank accounts, including £132,801 to the directors and associated parties
- In the same period £77,831 was paid to HMRC.
Total liabilities listed on the statement of affairs were £442,567, of which £298,076 was declared as outstanding to HMRC in respect of PAYE/NIC and VAT
Case 19 – Director Disqualification for trading to the detriment of HMRC and losses of £922,238.61
Director Disqualified for 2 years by a signed undertaking of the director / an undertaking agreed by the director / a director signed undertaking.
The Banned Director caused The Insolvent Company to trade to the detriment of HM Revenue and Customs (HMRC) from 1 June 2018 until the date of liquidation on 07 June 2021 resulting in estimated liabilities due to HMRC at liquidation totalling £922,238.61 (inclusive of interest). In that:
- A total liability was incurred for VAT and Income Tax/National Insurance Contributions resulting in a claim in the liquidation by HMRC of £922,238.61.
- A VAT liability of £475,003.57 is outstanding for the period 01 September 2019 to 06 June 2021.
- A PAYE/NIC liability of £447,235.04 is outstanding for the tax years 2017/18, 2018/19, 2019/20, 2020/21 and 2021/22.
- Financial statements for the year ending 31 May 2018 show that the Company had total liabilities of £6,033 of which £882 was owed to HMRC.
- Financial statements for the years ending 31 May 2019 and 2020 show the Company had total liabilities of £307,105 (£248,034 owed to HMRC) and £628,081 (£559,965 owed to HMRC) respectively.
- Analysis of the Company bank statements show £1,261,765.74 paid into the account in the period 01 June 2020 to 18 June 2021, and £1,205,567.79 paid out of the account in the same period. The bank statements show that no payments were made to HMRC in the period.
At liquidation, the company had total liabilities of £1,012,676.59 of which £922,238.61 is owed to HMRC.
Case 20 – Director Disqualification for unlawful withdrawal of money and loss to HMRC
Director Disqualified for 3 years by a signed undertaking of the director / an undertaking agreed by the director / a director signed undertaking.
From 1 April 2020 to 20 May 2021 The Director Disqualified withdrew funds totalling at least £72,933 from The Insolvent Company to the risk and ultimate detriment of HMRC, resulting at liquidation in an unpaid liability due to HM Revenue and Customs HMRC of £16,449 in respect of CT. In that;
- Accounts filed by the The Insolvent Company to 30 July 2019 disclose directors remuneration as £8,464 and an overdrawn directors loan account of £50,441. Corporation tax for the same period totalled £7,842, was due for full payment by 1 April 2020 and remains unpaid.
- Accounts filed by the The Insolvent Company to 31 July 2020 disclose directors remuneration as £8,424 and dividends paid at £62,264. Directors loan account balance NIL. Corporation tax for the same period totalled £8,608, was due for full payment by 1 April 2021 and remains unpaid.
- Accounts filed by the The Insolvent Company to 30 May 2021 disclose directors remuneration as £8,424, dividends paid of £43,440 and directors loan account at £17,570.
- Between 1 April 2020 and 20 May 2021 sums totalling £72,933 were paid via The Director Disqualified’s wife and ultimately for the benefit of The Banned Director.
At liquidation on 15 February 2022 the liabilities totalled £24,163, £23,863 of which was owed to HMRC (corporation tax from 1 August 2018 to 30 May 2021 totalling £23,192 plus interest of £671) and of this £16,449 was due before the date of liquidation.
Case 21 – Director Disqualification for failure to comply with statutory tax duties
Director Disqualified for 3 years by a signed undertaking of the director.
The Banned Director failed to ensure that The Insolvent Company complied with its statutory duties to file returns and make payments to HM Revenue and Customs (HMRC) when due and caused The Insolvent Company to trade to the detriment of HMRC from at least 22 September 2018 in respect of PAYE/NIC, VAT and Corporation Tax (CT) until liquidation on 5 December 2019. Further, from July 2019 onwards The Director Disqualified instructed The Insolvent Company’s accountant to make changes to the way drawings were allocated that were to his personal benefit and to the detriment of HMRC. In that:
PAYE/NIC
- HMRC’s final claim confirms that The Insolvent Company’s PAYE/NIC accrued from tax year 2017/18 onwards.
- RTI information provided by HMRC records credits in the sum of £13,424.84 and liabilities in the sum of £90,981.49 were allocated to The Insolvent Company’s PAYE/NIC account from tax year 2017/18 onwards. .
- Where credits of £13,424.84 are applied to the earliest PAYE/NIC liabilities which accrued from Month 1 of tax year 2017/18, they are sufficient to clear The Insolvent Company’s PAYE/NIC liabilities in full up to and including Month 4 of tax year 2018/19 (ended 05 August 2018).
- PAYE/NIC due in respect of Month 5 of tax year 2018/19 (month ended 05 September 2018) was not cleared in full and was due for payment in full by 22 September 2018.
- On liquidation, PAYE/NIC liabilities totalling £77,184.50 remained outstanding and overdue on liquidation covering periods Month 5 tax year 2018/19 to Month 8 of tax year 2019/20.
- The final payment was made towards The Insolvent Company’s PAYE/NIC liabilities on 11 July 2018.
VAT
- The Insolvent Company filed VAT returns in respect of periods 10/18 to 10/19 recording VAT due in respect of these periods in the sum of £42,327.57.
- Surcharges in the total sum of £4,931 were raised in respect of periods 10/18, 01/19 and 04/19.
- Payments totaling £15,160.92 were made between 21 December 2018 and 24 July 2019. When these payments are allocated to the earliest outstanding VAT liabilities they are sufficient to discharge the VAT and surcharge in respect of period 10/18 in full.
- As at the date of liquidation, VAT liabilities relating to periods 01/19 (due for payment in full by 7 March 2019) to 07/19 remained outstanding and overdue in the total sum of £32,097.57.
Corporation Tax
- A Corporation Tax return was submitted for the accounting period ended 31 July 2018 recording a total Corporation Tax liability due to HMRC in the sum of £26,630.
- Corporation Tax due in respect of period ended 31 July 2018 was due for payment in full by 1 May 2019. However, no payment was made by The Insolvent Company towards its outstanding Corporation Tax liabilities due for this period.
- As a consequence, a total Corporation Tax liability in the sum of £26,630 remained overdue and outstanding as at liquidation.
Comparative treatment
- HMRC is the majority creditor in the liquidation by a significant margin having claimed the total sum of £147,539.91.
- From 22 September 2018 to liquidation on 5 December 2019, The Insolvent Company’s current account received credits totalling £349,577.69 and expended £359,269.06 of which payments totalling £109,126.56 were paid to The Banned Director, £5,894.72 paid to The Disqualified and payments totalling £38,142.03 made to HMRC.
Reallocation of drawings
- In July 2019, The Banned Director instructed The Insolvent Company’s new accountants to process his earnings through payroll including funds previously extracted during months 1 4 of tax year 2019/20 which had been originally categorised as dividends. The Disqualified Director’ decision to instruct the new accountant to reallocate drawings as salary from dividends generated a significant PAYE/NIC liability in the sum of £59,570.44 which incurred in respect of month 7 of Tax Year 2019/2020 (due for payment by 22 November 2019) and increased The Insolvent Company’s outstanding PAYE/NIC liabilities claimed by HMRC on liquidation on 5 December 2019 to £77,184.50
- The consequence of The Banned Director’ decision to account for all of his withdrawals from The Insolvent Company as salary, and therefore via payroll, at a time when he had already become aware of the difficulties The Insolvent Company faced in continuing to trade was to The The Director Disqualified’s personal benefit and to the detriment of HMRC as it created a significant increase in the amount The Insolvent Company owed to HMRC which remained outstanding on liquidation.”
Case 22 – Director Disqualification for non payment of Corporation Tax
Director Disqualified for 5 years by an undertaking agreed by the director.
The Banned Director failed to ensure that The Liquidated Company met its financial commitments as regards to Corporation Tax (CT) and caused the Company to continue trading whilst withdrawing funds for the benefit of himself. As a result the Company became unable to meet its financial commitments to HM Revenue and Customs (HMRC) as and when they became due at the latest from 1 October 2017 resulting in £74,781 being due at liquidation. In that:
- Corporation tax due for the year ending 31 December 2016 was £15,623.08 and which should have been paid in full by 01 October 2017. Within this period £14,167.50 was paid, leaving a balance outstanding of £1,455.58;
- Corporation tax due for the year ending 31 December 2017 was £17,512.56 that should have been paid in full by 01 October 2018. Within this period £30.63 was paid, leaving a cumulative balance outstanding of £18,947.41
- Corporation tax due for the year ending 31 December 2018 was £23,435.31 which should have been paid in full by 01 October 2019. Within this period £3,400 was paid, leaving a cumulative balance outstanding of £38,972.72.
Comparative Treatment:
Bank statements available for the period 02 July 2018 to liquidation show that The Banned Director received a total of £229,167.66 including:
- between 02 July 2018 and 31 December 2018 he received £48,000;
- between 01 January 2019 and 31 December 2019 he received £92,314.
- On 10 July 2020 the Company received a BBL of £30,000 and upon receipt of the £30,000 BBL, it was all transferred to the Company’s savings account.
- On 21 September 2020 £20,000 was transferred to pay the deposit on a new home for The Disqualified Director.
- During the same period, HMRC received total payments of £3,431 for Corporation Tax.
At liquidation the Company owed HMRC £74,881 in relation to Corporation Tax accumulating since October 2017, £34,170 in relation to VAT and £30,000 in relation to the BBL. Non-government creditors totalled £1,095.
Case 23 – Director Disqualification for concealing true tax amounts
Director Disqualified for 5 years by a director signed undertaking.
Between 01 September 2013 and 30 November 2017, the Disqualified Director caused or allowed the Liquidated Company (the company) to conceal the true level of Value Added Tax (VAT) owed to HM Revenue & Customs (HMRC) resulting in a loss to HMRC of £457,024 inclusive of VAT, Civil Penalties and Interest
Following registration for VAT from 01 August 2011 the company submitted returns and paid, in full, the respective declared VAT liabilities up to and including April 2019
- On 27 March 2019, as the result of an investigation conducted by HMRC, it was found that the Disqualified Director had caused or allowed the company to under-declare the true level of VAT owed over 16 quarters between 01 September 2013 and 30 November 2017 resulting in HMRC issuing officers assessments in the sum of £240,931 inclusive of interest. This had been calculated on the basis of the difference between the annual accounts turnover for the financial years 2014 to 2017, inclusive, and the declared VAT outputs for the same periods
- On 5 June 2019 a letter was issued to the company advising of the intention to charge penalties of £200,694 under Schedule 24 of the Finance Act 2007. HMRC considered that the under declaration of VAT was deliberate and concealed
- On 12 July 2019 the company’s agent requested a statutory review, relative to the Penalties raised, on behalf of the company. This was duly undertaken and on 23 August 2019 a letter was issued to both the agent and company advising that the original decision had been upheld
At Liquidation, HMRC were the majority creditor with liabilities of £460,23 inclusive of interest and penalties, from overall liabilities of £738,586.
Case 24 – Director Disqualification for under-declaring VAT to HMRC
Director Disqualified for 5 years by a signed undertaking of the director / an undertaking agreed by the director / a director signed undertaking.
The Company Director (CD) caused or allowed the Liquidated Company (the company) to under-declare its VAT liability owed to HM Revenue & Customs (HMRC) between October 2015 and January 2019, resulting in a loss of revenue, inclusive of interest and penalties of £217,499 in that:
- Following registration for VAT the company submitted VAT returns for VAT quarters ending July 2014 to October 2018 totalling £141,151, which was paid in full.
- On 23 January 2019, following a telephone call with CD, HMRC wrote to the company confirming a VAT inspection visit had been arranged for 25 January 2019. On 28 January 2019 the company submitted a VAT deregistration request proposing deregistration for VAT on 29 January 2019 on the basis that trading had ceased. On 30 January 2019 HMRC confirmed the deregistration.
- On 01 August 2019, following a VAT investigation, HMRC issued an assessment in the sum of £170,071 in respect of under-declared VAT between VAT quarters ending October 2015 to January 2019 which attracted interest of £6,277. Notwithstanding the company was requested to pay the total sum of £176,348 immediately, it failed to do so.
- As a consequence of the company failing to pay the sum of £176,348, HMRC issued Civil Penalty notices for the period October 2015 to January 2019 totalling £41,151 which increased the outstanding liability to £217,499.
In the absence of payment HMRC presented a winding up petition which resulted in the company being placed into liquidation on 20 March 2020.
Case 25 – Director Disqualification for director failing to keep informed about financial affairs
Director Disqualified for 8 years by an undertaking agreed by the director.
The Company Director abrogated his responsibilities as a director of the bust company by failing to ascertain or keep himself informed about the bust company and its financial position and activities, and by taking no active role in controlling or supervising its affairs:
- The Company Director was a director of the bust company between 30 November 2017 and the bust company liquidation on 20 September 2018;
- in January 2018 the bust company sold its business and assets but The Company Director has said that he was unaware of the sale at the time;
- on 29 January 2018, the purchaser paid £750,000 of the £1,250,000 purchase price to the bust company shareholder rather than to the bust company but The Company Director has said that he was unaware of the sale price or to whom it was agreed that it would be the company;
- the sale completed on 31 January 2018 by which date the company had assets of £1,030,345. This included £469,533 owed to the company by associates but these monies were not repaid to the company before the liquidation;
- on 31 January 2018 DC had liabilities of £739,813 including at least £198,174 due to Her Majesty’s Revenue & Customs (HMRC). Additional HMRC liabilities of £300,776 had already accrued by 31 January 2018 and fell due for payment before liquidation, but no further payments were made to HMRC although they were the company’s largest creditor;
- between 29 January and 03 September 2018 payments of £508,201 were made from the company bank account and a further £58,807 was paid out on its behalf by the purchaser, including a further £160,350 that was paid to or on behalf of the company shareholder and its associates, but The Company Director has said that he did not authorize or approve these payments;
The company went into liquidation on 20 September 2018 with assets of £55,378 and liabilities of £617,615, including £499,762 owed to HMRC. No amounts owed by associated companies at the liquidation date were disclosed in the company statement of affairs and the liquidators have received no money from associated companies in the liquidation.
Case 26 – Director Disqualification for not complying with statutory duties and trading to detriment of HMRC
Director Disqualified for 7 years by Order of the Court.
The Banned Director failed to ensure that The Insolvent Company complied with its statutory duties and make payments to HM Revenue and Customs (HMRC) when due and therefore caused The Insolvent Company to trade to the detriment of HMRC in respect of VAT from 07 November 2017 to liquidation on 20 July 2020. As a result, HMRC’s VAT liabilities estimated in the sum of £193,683.75 remained overdue and outstanding on liquidation. In that:
VAT
- His existing sole trader business was incorporated on 26 February 2010 as The Insolvent Company. The Insolvent Company commenced trading on incorporation using the existing VAT registration number.
- A Time to Pay arrangement (TTP) was made with HMRC on 22 March 2017. Whilst the TTP was conditional on returns being filed on time and payments made in full, payments towards The Insolvent Company’s VAT liabilities were not maintained and payments for the periods 06/17, 09/17 and 12/17 were not paid in full.
- HMRC wrote to The Insolvent Company on 16 March 2018 to confirm the TTP had failed and the outstanding VAT was £71,368.01.
- Following a review of The Insolvent Company’s sale and purchase invoices, HMRC wrote to The Insolvent Company on 07 June 2019 to notify of an adjustment to the VAT for the period 09/18.
- HMRC presented a winding up petition on 3 February 2020 which included the outstanding VAT liability of £154,945.02 for the periods 06/17, 09/17, 03/18, 06/18, 09/18, 12/18 and 06/19 with surcharges of £8,788.49 for the periods 06/18, 12/18 and 03/19.
- The Insolvent Company first made contact with the Liquidator on 5 February 2020. A CVA proposal was issued to creditors on 28 February 2020. The CVA proposal was approved by creditors, but a decision was taken by the directors to withdraw the CVA proposal due to the impact of coronavirus and The Insolvent Company was placed with liquidation on 20 July 2020.
- The Insolvent Company’s VAT liability for the period 06/17 was almost discharged in full. Outstanding Liability information provided by HMRC confirms that The Insolvent Company did not maintain payments towards its VAT liabilities from the period 09/17 onwards (which was due for payment on 7 November 2017).
Comparative treatment
- HMRC is the largest creditor in the liquidation with the VAT claim of £193,683.75 (Tax of £184,895.26 and surcharges of £8,788.49). HMRC’s total claim is £203,641.14.
- The estimated deficiency in the Statement of Affairs signed on 13 July 2020 was £359,969, of which Trade and Expense creditors were £42,063.77 and Employee Claims were £43,483.27.
- The bank and a finance company were creditors for a total of £72,064.19. Personal guarantees have been given by the directors in respect of the bank and the finance company.
- As at 27 March 2020, the outstanding Directors Loan Account (DLA) was £44,037.26. On 31 March 2020, the DLA balance was reduced by the declaration of dividend of £40,000 for the accounting period ended 31 March 2020. The £40,000 dividend was not paid out of the bank account to the directors, but instead allocated to the overdrawn Director Loan Account. In the absence of the dividend then the outstanding DLA would have been £44,017.26 at liquidation.
- During the period from 02 July 2018 to liquidation (on 20 July 2020), The Insolvent Company’s bank account received the total sum of £2,426,180.02 and paid out the total sum of £2,445,724.28; HMRC received £72,563.27 of which £48,305.61 is identified as being in respect of VAT.
- During the same period, HMRC records show the same amount was received by HMRC in respect of VAT with the last payment being made on 30 January 2020 in the sum of £5,000.
Case 27 – Director Disqualification for not meeting statutory duties to HMRC + non payment of VAT / PAYE
Director Disqualified for 12 years by Court Order.
The Disqualified Director failed to ensure that The Dissolved Company met its statutory obligations to HM Revenue and Customs (HMRC) by failing to register the liquidated company for VAT when the liquidated company turnover had exceeded the VAT threshold and failing to remit VAT due to HMRC from 01 November 2016 until cessation of trade in July 2019, as a result of which HMRC has raised an assessment against the liquidated company for £29,070 in respect of VAT that remains unpaid in the liquidation.
- A company is required to register for VAT with HMRC when its turnover exceeds a specified amount (the VAT threshold)
- the liquidated company accountants informed the liquidated company in an email sent on 21 September 2016, that the liquidated company turnover was approaching the VAT threshold and that DC ought to consider registering for VAT
- In the tax year 2016/2017 the VAT threshold was £83,000, in the tax years 2017/2018, 2018/2019 and 2019/2020 the VAT threshold was £85,000
- Accounts for year end 30 November 2016, which were signed off on 30 August 2017, state that the liquidated company annual turnover for that period was £105,783
- Accounts for year end 30 November 2017, which were signed off on 31 August 2018 state that PNP’s annual turnover for that period was £145,084
- Accounts for year end 30 November 2018, which were signed off on 24 September 2019, state that DC annual turnover for that period was £142,012
- Bank statements for the liquidated company account with Barclays Bank show that between 01 December 2018 and 31 July 2019 (by which time the liquidated company had ceased trading) the liquidated company received funds totalling £88,694
- HMRC have calculated that the liquidated company ought to have been VAT registered from 01 November 2016 and have raised an assessment in respect of VAT that the bust company ought to have remitted between that date and cessation of trade in July 2019 totalling £29,070
Comparative treatment:
Bank statements for the period from 16 October 2017 to 08 November 2019 for DC account with Barclays have been provided to the Insolvency Service, these show that in that period:
DC has received £257,429 (of which £624 arises from banking loyalty initiatives, subsequently refunded payments and amounts related to subsequently dishonoured payments)
DC has made payments totalling £260,281 (including £549 which was either subsequently dishonoured or refunded) of which:
- £157,144 appears to have been paid out to trade creditors or in respect of other trading overheads
- £45,413 was paid to S
- £43,213 was paid to The Disqualified Director
- £11,248 was paid to vehicle financing companies
- £1,863 was paid to HMRC (of which nil was in respect of VAT liabilities)
- £958 was paid to the bank in respect of banking charges
- £442 was withdrawn in cash
The proof of debt form submitted by the trade creditor shows that liabilities due to that creditor only started to accrue in May 2019, whereas the VAT liability started to accrue in November 2016
Case 28 Director Disqualification for not submitting accurate VAT returns
Director Disqualified for 4 years by a signed undertaking of the director.
From at least 7 March 2015 to 10 June 2019, the Disqualified Director failed to ensure that the Liquidated Company (LC) submitted accurate Value Added Tax (VAT) returns to HM Revenue and Customs (HMRC). Following an investigation by HMRC, it was determined that the Liquidated Company had underdeclared its VAT liabilities for the tax months ended 01/15 to 06/19, which resulted in an additional Value Added Tax liability to HMRC of £3,506,183, in that:
- The company filed monthly returns. HMRC’s investigations involved the tax months ended 01/15 to 06/19. The company did not file the tax returns for the months ended 04/19 and 05/19. A nil return was filed for the month ended 06/19.
- HMRC commenced their tax inquiry into the company on 21 August 2020 after discrepancies were discovered between the total sales output declared in the company’s VAT returns with the amount of payments received by the company from its clients as a subcontractor.
- HMRC’s inquiry shows that for the relevant tax period, the company declared sales totalling £14,031,534 however it received payments totalling £29,514,100, resulting in total un-declared sales of £15,482,566.
- HMRC used the standard rate of 20% on the £29,514,100 received to calculate VAT of £5,902,820. HMRC deducted the total input tax declared of £165,997 and the net tax declared of £2,230,617 during the relevant period which resulted in the assessment sum of £3,506,183.
Case 29 – Director Disqualification for not registering for VAT
Director Disqualified for 4 years by a director signed undertaking.
The Disqualified Director failed to ensure that The Dissolved Company (DC) met its statutory obligations to HM Revenue and Customs (HMRC) by failing to register DC for VAT when DC turnover had exceeded the VAT threshold and failing to remit VAT due to HMRC from November 2016 until cessation of trade in July 2019, as a result of which HMRC has raised an assessment against DC for £29,070 in respect of VAT that remains unpaid in the liquidation.
- A company is required to register for VAT with HMRC when its turnover exceeds a specified amount (the VAT threshold)
- The insolvent business’s accountants informed the insolvent business, in an email sent on 21 September 2016, that the insolvent business turnover was such that the insolvent business ought to consider registering for VAT
- In the tax year 2016/2017 the VAT threshold was £83,000, in the tax years 2017/2018, 2018/2019 and 2019/2020 the VAT threshold was £85,000
- Accounts for year end 30 November 2016, which were signed off on 30 August 2017, state that the insolvent business annual turnover for that period was £105,783
- Accounts for year end 30 November 2017, which were signed off on 31 August 2018 state that the insolvent business annual turnover for that period was £145,084
- Accounts for year end 30 November 2018, which were signed off on 24 September 2019, state that the insolvent business annual turnover for that period was £142,012
- Bank statements for the insolvent business account with Barclays Bank show that between 01 December 2018 and 31 July 2019 (by which time PNP had ceased trading) the insolvent business received funds totalling £88,694
- HMRC have calculated that the insolvent business ought to have been VAT registered from 01 November 2016 and have raised an assessment in respect of VAT that the insolvent business ought to have remitted between that date and cessation of trade in July 2019 totalling £29,070
Comparative treatment:
Bank statements for the period from 16 October 2017 to 08 November 2019 for the insolvent business account with Barclays have been provided to the Insolvency Service, these show that in that period:
o the insolvent business has received £257,429 (of which £624 arises from banking loyalty initiatives, subsequently refunded payments and amounts related to subsequently dishonoured payments)
o the insolvent business has made payments totalling £260,281 (including £549 which was either subsequently dishonoured or refunded) of which:
– £157,144 appears to have been paid out to trade creditors or in respect of other trading overheads
– £45,413 was paid to The Disqualified Director
– £43,213 was paid to Rogers
– £11,248 was paid to vehicle financing companies
– £1,863 was paid to HMRC (of which nil was in respect of VAT liabilities)
– £958 was paid to the bank in respect of banking charges
– £442 was withdrawn in cash
The proof of debt form submitted by the trade creditor shows that liabilities due to that creditor only started to accrue in May 2019, whereas the VAT liability started to accrue in November 2016
Case 30 – Director Disqualification for exceeding the VAT threshold
Director Disqualified for 6 years by an undertaking agreed by the director.
The Banned Director failed to register The Liquidated Company for Value Added Tax (VAT) when The Liquidated Company’s turnover had exceeded the requisite VAT threshold requiring registration causing HM Revenue & Customs (HMRC) to raise assessments of VAT of £56,727 in respect of The Liquidated Company’s trading activities, and penalties of £13,614.58 which remained outstanding at liquidation. In that:
- The Liquidated Company traded between 18 July 2019 and 18 March 2021 after it purchased the trading entity known as R as a going concern.
- The Liquidated Company failed to register for VAT, failed to make any return to HMRC in relation to the VAT it had collected and failed to remit any funds to HMRC in respect of the VAT that it had charged on sales.
- From information provided by an online food delivery company and the Company’s Merchant Acquirer, HMRC have calculated the Company’s total sales in the period 18 July 2019 and 18 March 2021 totalled at least £440,428.95.
- Cash sales have been estimated at £63,979.27 between July 19 and February 2020 and at nil thereafter.
- HMRC raised an assessment on 27 October 2021 totalling £56,727.43 plus penalties of £13,614.58.
- Credits into the Company’s bank account in the period 1 July 2019 to 9 July 2021 (excluding start up funds and an HMRC Job Retention Scheme grant) totalled £56,880.05.
- Payments from an online food delivery company and the Merchant Acquirer were not paid into the Company’s known bank account.
- HMRC were in contact with the Company from 5 March 2021 and repeatedly asked for evidence of the Company’s trading, receiving no information of substance.
- HMRC has filed a claim in the Company’s liquidation including debts in relation to VAT in a total amount of £71,042.01.
Case 31 – Director Disqualification for trading to the detriment of HMRC, VAT & NIC offences
Director Disqualified for 2 by a signed undertaking of the director.
That in the period 24 June 2016, at the latest, to the cessation of trade on 30 November 2018 (VAT period), The Banned Director caused The Insolvent Company to trade to the detriment of HM Revenue & Customs (HMRC) in respect of Value Added Tax (VAT), resulting in a VAT liability at the cessation of trade totalling £81,580. In addition, during the period 25 July 2016 at the latest, to the cessation of trade on 30 November 2018 (PAYE period), The Banned Director caused The Insolvent Company to trade to the detriment of HMRC in respect of Pay as You Earn, National Insurance Contributions and Student Loan Deductions (PAYE) resulting in a PAYE liability at the cessation of trade totalling £36,282.
VAT:
- During the VAT period The Insolvent Company submitted 12 VAT returns with a combined liability of £79,469, in addition 2 VAT assessments were raised with a combined liability of £12,946.
- During the VAT period surcharges of £6,309 were applied by HMRC with a further sum of £2,273 added to HMRC’s claim in respect of interest.
- During the VAT period payments made by The Insolvent Company in respect of VAT totalled £18,919.
- On 27 July 2017 The Insolvent Company agreed a Time to Pay Agreement (TTP) with HMRC in respect of the outstanding VAT liability. Post the commencement of the Time To Pay, although The Insolvent Company made payments totalling £4,705 in respect of the VAT returns for the quarters ended June 2017 and December 2017, The Insolvent Company made no payments in respect of the historical VAT liability as included in the TTP.
- At the cessation of trade, The Insolvent Company’s VAT liability totalled £81,580.
PAYE:
- On 25 July 2016 The Insolvent Company agreed a TTP in respect of a PAYE liability accumulated from month 11 of 2013/2014. The TTP agreement required The Insolvent Company to pay £3,628 on 05 August 2016 and then £4,500 per month from 05 September 2016 until 05 January 2017. All payments were made apart from the last. During the TTP agreement The Insolvent Company retained a requirement to service its ongoing PAYE commitment.
- Following the commencement of the TTP on 25 July 2016 and during the allegation PAYE period, The Insolvent Company submitted a further 24 PAYE RTI monthly returns with a combined liability of £46,948. A further sum of £695 was added to HMRC’s claim in respect of interest, with the employment allowance for the period reducing the liability by £6,005.
- During the PAYE period The Insolvent Company made payments of £30,833 in respect of PAYE. Of the £30,833, £21,628 was paid to reduce the historical PAYE liability as included in the TTP, with £9,204 paid to service the ongoing PAYE commitment.
- As a result of The Insolvent Company’s failure to pay the ongoing commitment in full, a further TTP agreement was required and it was agreed that this would commence of 27 July 2017, The Insolvent Company made no payments to HMRC in respect of the 2nd TTP agreement.
- At cessation of trade The Insolvent Company’s PAYE liability totalled £36,282.
DIFFERENTIAL TREATMENT
- Financial Statements dated 31 March 2017:
- Financial Statements for the period ended 31 March 2017 and signed on behalf of the board by The Banned Director on 20 December 2017 record liabilities in respect of bank loans and overdrafts for the period ended 31 March 2016 of £66,982 and for the period ended 31 March 2017 of £46,672, whilst the Statement of Affairs records liabilities in respect of bank loans and overdrafts of £9,217, a reduction of £57,675.
- Financial Statements for the year ended 31 March 2017 and signed on behalf of the board by The Director Disqualified on 20 December 2017 record liabilities in respect of trade creditors for the period ended 31 March 2016 of £28,752 and for the period ended 31 March 2017 of £3,736, whilst the Statement of Affairs records liabilities in respect of trade & expense creditors of £3,640, a reduction of £25,112.
- Financial Statements for the year ended 31 March 2017 and signed on behalf of the board by The Disqualified Director on 20 December 2017 record liabilities in respect of other creditors for the period ended 31 March 2016 of £19,282 and for the period ended 31 March 2017 of £33,602, whilst the Statement of Affairs records liabilities in respect of other creditors of £0, a reduction of £19,282.
- Financial Statements for the period ended 31 March 2017 and signed on behalf of the board by The Banned Director on 20 December 2017 record liabilities in respect of Taxation and Social Security for the period ended 31 March 2016 of £80,533 and for the period ended 31 March 2017 of £86,061, whilst the Statement of Affairs records liabilities in respect of Taxation and Social Security of £118,362, an increase of £37,829.
The Insolvent Company’s Expenditure:
- The Insolvency Service has analysed The Insolvent Company’s bank statements for Lloyds bank account 30-80-37 10494463 for the period 24 June 2016 to 30 November 2018. The analysis confirms that during the period 24 June 2016 to 30 November 2018, The Insolvent Company’s bank account received credits totalling £847,519 (excluding returned payments) and expenditure from The Insolvent Company’s bank account totalled £844,590 (excluding failed payments).
- Of The Insolvent Company’s £844,590 expenditure, £284,574 was paid to employees, £87,482 net was paid to connected companies, £85,005 net was paid to The Banned Director, £105,971 was paid to trade and expense creditors, £20,141 net was paid to a connected bank account, £30,599 was paid to HMRC in respect of PAYE, £26,692 was accounted for by payments annotated Forgn Pyt (Foreign Payment), £20,103 was accounted for by cheque payments, £18,919 was paid to HMRC in respect of VAT and £4,674 was accounted for by interest/charges.
Case 32 Director Disqualification for inaccurate information on VAT returns
Director Disqualified for 8 years by an undertaking agreed by the director.
The Banned Director caused or allowed The Liquidated Company to submit VAT returns to HM Revenue & Customs (HMRC) which included inaccurate information between at least 01 November 2009 to 01 December 2015 and 01 February 2016 to 31 October 2017, resulting in a liability of at least £550,651 to HMRC at Liquidation on 22 July 2020 in that:
- He was a director in The Liquidated Company between 01 February 2007 and 01 December 2015 and also 01 February 2016 and 01 November 2018. The Liquidated Company registered itself for VAT with effect from 01 March 2007.
- During 2010 HMRC undertook a compliance check of 4 VAT returns submitted for quarters ending between 31 January 2009 and 31 October 2009. HMRC determined that across this period payments into the company bank account(s) were found to exceed that declared on the VAT returns and consequently on 25 June 2010 they raised an assessment of £12,656 (excluding interest of £339.33).
- Available VAT ledgers provided by HMRC show that up to 01 December 2015 (the date of his first resignation as director) The Liquidated Company submitted 1 VAT claim in respect of the quarter ending 31 January 2013 for £22,708 (which was inhibited against other VAT due) and 7 VAT returns for quarters ending between 30 April 2013 and 31 July 2015 declaring VAT due of £14,492.
- From 01 February 2016 (the date of his second appointment as director) The Liquidated Company submitted 7 VAT returns for quarters ending between 31 January 2016 and 31 October 2017 declaring VAT due of £21,234. From the same date, The Liquidated Company also submitted a VAT return for the quarter ending 31 January 2012 and also 4 returns for quarters ending 31 October 2014 to 31 October 2015 declaring VAT due of £10,421.
- HMRC received its final VAT return and payment from The Liquidated Company on 07 December 2017 in respect of the quarter ending 31 October 2017 which left an outstanding balance of £541 due to HMRC.
- From February 2018 HMRC undertook a compliance check of 4 VAT returns submitted for quarters ending between 31 January 2017 and 31 October 2017. HMRC identified payments into The Liquidated Company’ bank account(s) exceeded that declared on the VAT returns by £218,153.
- HMRC sampled 6 months of purchase invoices across 2 VAT returns submitted for the quarters ended 31 July 2017 and 31 October 2017 in which they identified that some invoices were not associated to The Liquidated Company that had been claimed for Input Tax. In this period HMRC considered that the allowable Input tax to be £1,729 against that claimed of £2,461.
- HMRC categorised the submission of the inaccurate VAT returns as deliberate as they deemed that there had been no alterations when comparing the behaviour between 2008/2009 and 2016/2017.
- He resigned as a director on 01 November 2018 and HMRC had raised 3 assessments for the quarters ending 31 January 2018, 30 April 2018 and 31 July 2018 for VAT due totalling £10,622 (excluding surcharges of £1,593) which remained unpaid at Liquidation. The VAT return for the quarter ending 31 January 2018 was due for payment by 07 March 2018.
- On 01 July 2019 HMRC notified The Liquidated Company that following their compliance check they had raised backdated assessments of £329,101 (excluding interest of £7,732) and issued penalties of £201,603 for periods between 01 November 2009 and 31 October 2017. These assessments and penalties remained unpaid at Liquidation.
- At Liquidation, the liquidated company had total liabilities of £587,430 of which at least £550,651 was due in respect of VAT to HMRC (VAT £339,723, surcharges £1,593, interest £7,732 and penalties £201,603) for periods between 01 November 2009 and 31 October 2018 (the date prior to his resignation as a director).
Case 33 Director Disqualification for inaccurate VAT records submitted
Director Disqualified for 4 years by a director signed undertaking.
From at least 7 March 2015 to 10 June 2019, the Disqualified Director allowed The Failed Company submit inaccurate Value Added Tax (VAT) returns to HM Revenue and Customs (HMRC). Following an investigation by HMRC, it was determined that The Failed Company had underdeclared its VAT liabilities for the tax months ended 01/15 to 06/19, which resulted in an additional Value Added Tax liability to HMRC of £3,506,183, in that:
- The company filed monthly returns. HMRC’s investigations involved the tax months ended 01/15 to 06/19. The company did not file the tax returns for the months ended 04/19 and 05/19. A nil return was filed for the month ended 06/19.
- HMRC commenced their tax inquiry into the company on 21 August 2020 after discrepancies were discovered between the total sales output declared in the company’s VAT returns with the amount of payments received by the company from its clients as a subcontractor.
- HMRC’s inquiry shows that for the relevant tax period, the company declared sales totalling £14,031,534 however it received payments totalling £29,514,100, resulting in total un-declared sales of £15,482,566.
- HMRC used the standard rate of 20% on the £29,514,100 received to calculate VAT of £5,902,820. HMRC deducted the total input tax declared of £165,997 and the net tax declared of £2,230,617 during the relevant period which resulted in the assessment sum of £3,506,183.
Case 34 – Director Disqualification for trading to the detriment of HMRC
Director Disqualified for 4 years by a signed undertaking of the director.
The Banned Director failed to ensure that The Insolvent Company complied with its statutory duties to make timely payments as and when due to HM Revenue & Customs (HMRC) in relation to Value Added Tax (VAT) and Pay As You Earn Tax (PAYE). As a result, he caused The Insolvent Company to trade to the detriment of HMRC in respect of PAYE from 22 January 2017, at the latest and in respect of VAT from 07 October 2017 at the latest until 28 September 2018 resulting in a liability of at least £87,782.58, in that:
- HMRC’s claim for VAT is £48,878.68 including surcharges of £2,214.29.
- The Insolvent Company fell into arrears with VAT on 07 October 2017 when payment for the return for the quarter 08/17 of £3,761.63 fell due and was not paid.
- As a result of The Insolvent Company failure to submit full payments as and when due, HMRC applied default VAT surcharges of £2,214,29.
- HMRC’s claim for PAYE is £53,353.40, including penalties and interest, owed for the period 2016/17 onwards.
- The Insolvent Company accounting records show that £38,903.79 is owed in respect of PAYE from 22 July 2017 at the latest.
- Between 22 January 2017 and 28 September 2018, 7 payments amounting to £19,417.34 were made for PAYE and between 07 October and 28 September 2018 4 payments amounting to £5,831.53 were made for VAT.
- Bank statements for The Insolvent Company, which cover the period from 22 January 2017 to 28 September 2018 show total payments from the account of £1,088,754.
- In the same period, £235,152.52 was paid to trade creditors, utility companies and transport expenses, £143,097.39 was paid in respect of loan repayments and £242,476.40 was paid as wages.
Case 35 – Director Disqualification for failing to submit VAT returns
Director Disqualified for 3 years by Order of the Court.
The The Director Disqualified failed to ensure that The Insolvent Company fulfilled its statutory obligations to submit returns and remit taxes when due to HM Revenue and Customs (HMRC) and caused the company to trade to the detriment of HMRC from 7 April 2016 in respect of VAT until September 2018 when the company ceased trading. In particular:
VAT
- The return for the quarter ended 02/16 was due for submission and payment on 7 April 2016 but it was received without payment on 6 May 2016 and showed VAT payable of £2,316.30.
- Returns for the six quarters 05/16 to 08/17 were not submitted by the due date as a result of which assessments and surcharges totalling £15,901.00 and £1,479.55 were raised by HMRC.
- The returns were received without payment on 31 May 2018 and showed VAT payable of £37,070.73. The original surcharges were cancelled and the replacement surcharges totalled £3,439.23.
- The return for the quarter ended 11/17 was received without payment on 31 May 2018 and showed VAT payable of £5,457.82.
- No further returns were submitted by the company as a result of which assessments and surcharges totalling £20,430.00 and £2,715.30 were raised by HMRC for the quarters 02/18 to 11/18.
- The liability therefore increased by £62,958.55, excluding surcharges of £6,154.53, in the period 8 April 2016 to September 2018.
Comparative Treatment
- The company’s bank statements show that in the period 8 April 2016 to September 2018 payments totalled £430,428.94 and nothing was paid to HMRC in respect of VAT.
- During the same period at least £135,656.89 was paid for the benefit of The Banned Director.
- At the date of liquidation, the company owed a further £34,600.00 to HMRC in respect of Corporation Tax and £10,040.56 for penalties, interest and costs.
Case 36 – Director Disqualification for fraudulent evasion of VAT
Director Disqualified for 8 years by a signed undertaking of the director.
Between March and June 2018 The Company Director caused The Dissolved Company to participate in transactions which were connected with the fraudulent evasion of Value Added Tax (VAT), such connections being something which The Company Director either knew or should have known about.
ANNEX
- The Company Director was aware that the fraudulent evasion of VAT was widespread in the international wholesale metals trade in which The Dissolved Company operated because:
- HMRC officers visited The Dissolved Company on 11 January 2018 and educated him regarding this, issuing a copy of their PN726 information notice (Joint and several liability for unpaid VAT) which gives examples of indicators which could alert him to the risk that VAT would go unpaid and examples of due diligence measures that companies can and should take to establish the integrity of supply chains;
- the HMRC officers explained to The Company Director:
- about missing traders and how HMRC can hold everyone in a supply chain responsible for unpaid VAT;
- that their 726 notice pointed the way;
- that he must make every reasonable effort and do as much as possible to cover his responsibilities;
- The trading in which The Dissolved Company was involved displayed some common features of the fraudulent evasion of VAT which should have put The Company Director on enquiry regarding the legitimacy of that trading:
- The Company Director told HMRC that, before it switched to wholesale metal trading in October 2017, The Dissolved Company had been a general brokerage company dealing in electronics, shampoo and cosmetics;
- The Dissolved Company’s turnover increased dramatically in a very short time. The Dissolved Company’s turnover in the period from the March 2013 to the September 2017 VAT quarters was only £197,275 whereas declared sales between the December 2017 and September 2018 VAT quarters were £28,999,496, it is HMRC’s view that such a sudden increase is simply too good to be true;
- The Dissolved Company’s deals were all conducted on a back-to-back basis;
- The Dissolved Company requested some customers make payments to third parties
- The Dissolved Company was also buying other metals in the EU and selling them in the UK at a loss, which does not make commercial sense; the VAT input credits from the silver trades were being generated by purchasing from UK fraudulent defaulters to offset the VAT liabilities that The Dissolved Company was incurring on the UK sales;
- Whilst The Company Director has referred to inspecting the silver before fixing a price, there is no evidence that The Dissolved Company undertook, either itself or by instructing a third party, any inspections of the silver to confirm its quantity or quality.
- The Dissolved Company were visited by HMRC officers on 25 October 2017 and the director never mentioned commencing trading in metals. On 26 October 2017, The Dissolved Company issued their first invoice for the sale of wholesale metal.
- the prices that The Dissolved Company sold the silver at were substantially above the market price at the time of the sales, as was the price that The Dissolved Company paid for silver in March 2018;
Despite being aware of the prevalence of fraudulent evasion of VAT in the wholesale metals sector and engaging in transactions bearing the features of such fraud, The Company Director failed to ensure that The Dissolved Company carried out effective steps and/or due diligence in respect of its trade and of its trading partners as follows:
- The Dissolved Company carried out VAT validation checks on its suppliers but copies in The Dissolved Company’s available records are dated after the dates when The Dissolved Company began to purchase from them;
- Despite the high values of its silver trades, The Dissolved Company’s records do not contain evidence that it carried out any other forms of due diligence such as conducting credit checks, obtaining or providing trade references, or discussing and agreeing terms before beginning to trade with the parties involved.
- The Company Director has been given opportunities to provide evidence of any additional due diligence conducted but has failed to do so.
- The Company Director’s misconduct involves twenty-one silver deals. Ten of the deals were with a UK The Dissolved Company company, which traded in the recovery of sorted metals and entered into Creditors Voluntary Liquidation (CVL) in June 2018. Further, it’s director had been declared bankrupt and was not discharged until December 2016. The same director was disqualified for a period of 10 years in respect of his conduct as a director of another company. The remaining eleven of the twenty-one silver deals were with another UK The Dissolved Company company. The aforementioned director also acted for this company between January 2017 and February 2018. Both companies operated from the same office, site, website, email address and telephone number. The latter company also had insolvency issues as it was wound up further to a petition presented by HMRC in July 2020. The silver trading chains in which The Dissolved Company was involved caused a significant loss to HMRC:
On 19 December 2019, HMRC denied The Dissolved Company’s claims for input tax of £309,050, £920,070 and £476,238. For the avoidance of doubt, HMRC was unaware of 5 further purchases by The Dissolved Company in the period May-June 2018 and, consequently, these did not form part of HMRC’s denial letter. HMRC raised an assessment for £1,705,358.
Case 37 – Director Disqualification Case for trading to the detriment of HMRC
Director Disqualified for 3 years by a director signed undertaking.
The The Director Disqualified caused The Insolvent Company to trade to the detriment of Her Majesty’s Revenue & Customs (HMRC) in respect of Corporation Tax (CT) and Value Added Tax (VAT) from at least 31 July 2019 until liquidation in May 2021. As a result at liquidation HMRC were owed at least £401,687. In that:
- The Company filed annual accounts for the period ended 31 July 2019 (the 2019 Accounts). The 2019 Accounts listed creditors as including £150,818 due as Taxation and Social Security.
- The Company filed annual accounts for the period ended 31 July 2020 (the 2020 Accounts). The 2020 Accounts listed creditors as including £401,687 due as Taxation and social security and this remained due and outstanding at liquidation.
Corporation Tax
- The Company filed two CT returns for the periods ended 31 July 2019 and 31 July 2020 respectively, which declared a total liability due to HMRC of £36,940.85 both due for payment prior to May 2021. No payments were made by the Company and the liability remained outstanding at liquidation.
VAT
- The tax liabilities listed in the 2019 Accounts and the 2020 Accounts included unpaid VAT which remained due and outstanding at liquidation.
- The Company filed VAT returns that declared total VAT liabilities of £226,408 for the period between 1 August 2019 and 31 July 2020. No payments were made by the Company and the liability remained outstanding at liquidation.
- In the period between 01 August 2020 and cessation of trade the Company incurred further VAT liabilities but made no payment to HMRC.
Comparative treatment of creditors/apportionment of income
- Prepared accounts for the year ended 31 July 2019 show Taxation and social security of £150,818 and other creditors of £9,837, whereas accounts for the year ended 31 July 2020 show Taxation and social security of £401,687 and other creditors of nil.
- Between 24 July 2020 and 30 April 2021, payments totalling £2,105,508.83 were made from the Company’s bank account of which £33,049 was paid to The Banned Director, £47,223.18 was paid to a co-director, net £954,209.58 was paid to trade creditors & suppliers, net £246,344.03 was paid to a connected company, net £56,500 was paid to a second connected company, and Nil was paid to HMRC.
- At liquidation the creditors comprised, HMRC estimated at £401,687, Bank £51,250, utility company £624 and trade creditors £7,454.
Case 38 – Director Disqualification for submitting inaccurate VAT returns
Director Disqualified for 7 years by an undertaking agreed by the director.
Between periods 04/19 and 10/19, the Disqualified Director caused the Liquidated Company to submit inaccurate Value Added Tax (VAT) returns to Her Majesty’s Revenue and Customs (HMRC). As a result, HMRC issued assessments of £384,331 and penalties of £8,908 which remain unpaid at the date the Liquidated Company entered liquidation. In that:
- the Liquidated Company was compulsorily registered for VAT by HMRC on 3 February 2017.
- HMRC’s conducted an investigation into the Liquidated Company VAT returns for the quarters ended 30 April 2019, 31 July 2019 and 31 October 2019 and found that purchases amounting to 2,044,634 made by the Liquidated Company from a Spanish company had not been disclosed on these returns.
- HMRC made various requests for documentation and information from him but no documentation was received.
- Consequently, HMRC calculated the VAT due on the onward sale of these purchases from the Spanish company, which had not been disclosed on LC VAT returns, to be £384,331 and issued assessments to the Liquidated Company for this amount on 20 October 2020. Interest of £8,908 was also raised.
At the date of liquidation the Liquidated Company owed £654,649 to creditors of which at least £393,239 was owed to HMRC in respect of undeclared VAT and interest.
Case 39 – Director Disqualification for submitting inaccurate VAT and PAYE returns
Director Disqualified for 2 years by a signed undertaking of the director.
The Disqualified Director abrogated her duties as a director of The Dissolved Company from at least December 2013 and allowed The Dissolved Company to submit inaccurate returns to Her Majesty’s Revenue & Customers (HMRC) in respect of Value Added Tax (VAT) and Pay As You Earn (PAYE) resulting in liabilities of £52,399 that remained unpaid at the date of liquidation. In that:
VAT:
- The Dissolved Company was registered for VAT from the 01 January 2013 and submitted returns for periods up to and including June 2019.
- HMRC investigated The Dissolved Company between April and November 2017 and concluded that VAT amounts declared by The Dissolved Company were inaccurate.
- On 09 May 2019 HMRC raised an assessment in respect of underdeclared VAT totalling £7,870 and penalties & interest totalling £3,863 for the quarter ending June 2013 to June 2017.
- The Dissolved Company ceased trading on the 09 September 2018.
- HMRC’s total claim in liquidation is £11,733 in respect of VAT.
PAYE:
- The Dissolved Company registered for PAYE filing nil returns for the years ending April 2013 to April 2018.
- HMRC investigated The Dissolved Company between April and November 2017 and concluded that PAYE returns were inaccurate given the observed staffing levels.
- HMRC raised assessments in respect of PAYE on the 17 April 2019 for period 06 April 2012 to 05 April 2018 totalling £30,432 and issued a penalty of £10,174.
- HMRC’s total claim in liquidation in respect of PAYE is £40,606 including penalties & interest.”
Allegation amended 15/12/2021 as follows:
The Banned Director caused The Insolvent Company, to trade to the detriment of HM Revenue & Customs (HMRC) in respect of Value Added Tax (VAT) and Pay as You Earn/National Insurance Contributions (PAYE/NIC) and local authorities in respect of business rates from at least 7 September 2017 resulting in tax and business rates liabilities of £740,355 (out of a total deficiency as regards to creditors of £849,179) at liquidation on 10 January 2019. In that:
VAT
- The Insolvent Company’s turnover surpassed the threshold making it mandatory for it to register for VAT with HMRC by 18 September 2017. The Insolvent Company was registered with HMRC in respect of VAT on 04 December 2017.
- The Insolvent Company failed to submit any VAT returns and make payments to HMRC as and when due
- HMRC have submitted a claim in the amount of £319,522, for the period above, in respect of VAT made up of assessments in the amount of £314,641 and surcharges in the amount of £4,882.
PAYE/NIC
- The Insolvent Company submitted its PAYE/NIC returns for the period from 06 March 2018 to 05 January 2019, upon which no payments were made.
- HMRC submitted a claim in the amount of £144,735 in respect of The Insolvent Company’s PAYE/NIC liabilities. HMRC’s claim in respect of PAYE/NIC was made up as follows:
o £5,450 for tax year 2017/18, made up of £1,480 in respect of tax (PAYE) and £3,970 in respect of Class 1 NIC; and
o £139,285 for tax year 2018/19, made up of £58,972 in respect of tax (PAYE), £80,272 in respect of Class 1 NIC and £41 in respect of Student Loan deductions.
Business Rates
- The Insolvent Company traded from three addresses, the charges for business rates for the period 17 September 2017 to 10 January 2019 were £277,915.
- The Insolvent Company paid £5,150 in respect of business rates to two local authorities, at liquidation the total of £276,098 (including costs) remained outstanding
Detrimental treatment
- Between 21 September 2017 (bank account opened on 19 September 2017) and 10 January 2019, payments totalling £1,424,745 were paid from The Insolvent Company’s bank account, excluding payments subsequently refused by the bank.
- Of these monies, at least £966,858 was paid in respect of The Insolvent Company’s trade and expense creditors (other than local authorities), at least £384,077 was paid to employees of The Insolvent Company, at least £57,113 was paid to The Banned Director, at least £7,272 was withdrawn in cash and at least £3,574 was paid in interest and charges. During the same period nothing was paid to HMRC in respect of the Company’s VAT and PAYE/NIC liabilities and only £5,150 was paid to local authorities.
Case 40 – Director Disqualification for failing to meet statutory duties to HMRC & trading to detriment of HMRC
Director Disqualified for 9 years by a director signed undertaking.
The The Director Disqualified failed to ensure that the Liquidated Company complied with its statutory duties to make payments to HM Revenue and Customs (HMRC) when due and caused the Company to trade to the detriment of HMRC from at least 07 January 2020 in respect of Value Added Tax (VAT), and 22 July 2019 in respect of Pay As You Earn/National Insurance Contributions (PAYE/NIC) until liquidation on 19 May 2021. As a result, VAT liabilities (including surcharges) estimated in the sum of at least £222,650, and PAYE/NIC liabilities in the sum of £313,563 remained overdue and outstanding on liquidation. In that:
VAT
- HMRC’s final claim records that VAT and surcharges in the total sum of £243,777 was claimed in the liquidation, and which accrued from the 1 September 2019 onwards.
- The VAT return in respect of period 11/19 was due for payment in full by 7 January 2020.
- HMRC’s final claim confirms that surcharges relating to the period 1 August 2020 onwards in the sum of £11,244 remained outstanding on liquidation.
- Management accounts provided by the accountants record that net VAT (including surcharges) in the sum of £222,650 accrued between VAT periods 01/20 and 01/21. Period 04/21 was not due until after liquidation.
- The Company’s available bank statements record no payments were made to HMRC in respect of its VAT liabilities from at least 7 May 2020 onwards. VAT account records provided by the accountant records that payments in the total sum of £1,937 were allocated to the VAT account in respect of periods 01/20 and 04/21.
PAYE/NIC
- HMRC’s final claim confirms that PAYE in the sum of £37,620.79 and Employee NIC in the sum of £31,353.41 remained outstanding in respect of months 3-12 of tax year 2019/2020. PAYE and Employee NIC for month 3 of tax year 2019/2020 was due for payment by 22 June 2019.
- HMRC’s final claim confirms that Employer NIC and interest in the sum of £38,875.94 remained outstanding in respect of months 2-12 of tax year 2019/2012.
- HMRC’s final claim confirms that PAYE in the sum of £122,473.79 and Employee NIC in the sum of £26,122.72 remained outstanding in respect of months 1-12 of tax year 2020/2021.
- HMRC’s final claim confirms that Employer NIC in the sum of £57,116.68 remained outstanding in respect of months 1-12 of tax year 2020/2021.
- The Company’s PAYE/NIC liabilities are based on RTI returns.
- The Company’s available bank statements confirm that no payments were made to HMRC in respect of its PAYE/NIC liabilities from at least 7 May 2020 onwards.
Comparative treatment
- The Company’s accounts for the periods ended 31 July 2019, 31 July 2020 and 7 April 2021 record that social security and other tax liabilities increased year on year during these accounting periods from £62,552 (2019) to £339,061 (2020) to £541,415 (2021). Trade creditors remained relatively static throughout (£16,096 (2019), £6,925 (2020) and £10,291 (2021)).
- The Company’s accounts confirm that she received gross remuneration in the sum of £42,498 during accounting period ended 31 July 2019, £235,871 during accounting period ended 31 July 2020, and £54,663 during the accounting period ended 7 April 2020. The Company’s outstanding tax liabilities accrued over the same periods.
- HMRC is the majority creditor claiming the total sum of £557,740 in the liquidation. The bank is owed the sum of £62,618 and trade creditors owed £9,890.
The Company’s available bank statements record that from 7 May 2020 to liquidation on 19 May 2021, the Company’s current account received credits totalling at least £729,438 and expended at least £716,962 of which no payments were made to HMRC from the account towards the Company’s tax liabilities during this same period. Net payments in the sum of £46,635 were made to her, payments in the sum of £28,965 to connected party and cash withdrawals in the sum of £20,300 were made over the same period.
Case 41 – Director Disqualification for failing to comply with statutory duties to pay HMRC
Director Disqualified for 3 years by an undertaking agreed by the director.
The Banned Director failed to ensure that The Liquidated Company registered for VAT in compliance with its statutory obligations and make the requisite payments to HM Revenue and Customs (HMRC). As a result HMRC issued assessments in the amount of £119,491.15 in relation to VAT, comprising of £94,834.24 in VAT due and £24,656.91 in penalties. This liability has resulted from the general trade of the business between 10 May 2016 and 24 May 2018.
- Since The Liquidated Company’s Incorporation on 10 May 2016, the Company never registered for VAT.
- Professionally prepared unaudited accounts show turnover of period ending 31 May 2017 £77,68 Period ending 31 May 2018 £81,524 Period ending 20 December 2018 £43,691
- HMRC investigations established turnover during those periods was significantly higher during the periods ending 31 May 2017 and 31 May 2018 than is stated in the accounts, surpassing the VAT thresholds.
Assessment undertaken by HMRC
On 30 April 2021, the Assessment conducted by HMRC states that during the period 10 May 2016 to 24 May 2018 the Company sales totalled £669,418.17 resulting in a VAT liability of £94,834.25. Total sales are made up of the following;
- Merchant Acquirer – £49,068.03
- Online food provider – £604,022.87
- Cash Sales – £16,327.27
- Omissions within Statutory Filed Accounts
- During the following periods HMRC’s investigations have shown the following turnover for the periods;
- Period ending 31 May 2017 – £281,054.07
- Period Ending 31 May 2018 – £388,364.11
- There has been a significant omission of sales within the filed accounts
- Enquires have established that £604,022.87 in sales, less commission, were paid into a personal account held by the company
- Due to this omission the Company has a liability of £94,834.24 due to HMRC in relation to VAT, not including penalties
Director Disqualification Services
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- Dealing with early enquiries from the Insolvency Service
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- Public interest winding up petitions and disqualification
- Remain a director despite disqualification ban
- Section 16 letters
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