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In every company insolvency (administration or insolvent company liquidation), the insolvency practitioner’s statutory duties include submitting a report to the Department of Business (BIS) on the directors’ conduct. The purpose of the report is to enable the Secretary of State to decide whether the director is fit to be allowed to act in the management of a company, or whether they should be disqualified for a period of time.

Officials at BIS seem to take a particularly dim view of directors whose companies fail to pay taxes. They maintain – and who could argue with them? – that companies which do not pay tax gain an unfair advantage over their competitors.

In January 2013 alone:

Benny Albert Lazar ran The Synergy Spa Limited, a beauty salon, which traded from January 2008 until it went into liquidation in July 2010. When it ceased trading it owed creditors £153,391, including £110,174 to HMRC. During its whole period of trading it had paid just £20,163 in taxes. Mr Lazar also owned a bar, 19th Hole Ealing Limited, which went into liquidation on the same day as Synergy with total liabilities of £74,934, including £50,934 to HMRC.

The assets of 19th Hole were sold to another of Mr Lazar’s companies, R & L Ruislip Taverns Limited for £6,000, but that company also went into liquidation, less than a year later, owing HMRC £21,058.

Mr Lazar has been disqualified from acting as a director for four years.

Paul Andrew Charles Sterry and Darren Alan McGaughey ran a suspended ceiling company called BCP (NW) Limited which went into administration in November 2010 with total debts of £1.3 million. Of that, £598,547 had accrued to HMRC in the last 12 months of trading. There were also issues over the adequacy of the accounting records.

Sterry and McGaughey were disqualified for six years and five years respectively.

Gareth David Onions was a director of Deltaworld Limited, a company which field staff for merchandising. The company went into administration in March 2011 owing HMRC some £648,137 for PAYE and NICs. Between December 2008 and October 2010 the company had made only one payment (of £3,300) to HMRC, whereas Mr Onions had drawn £240,000 for himself.

Mr Onions has been disqualified for five years. Mr Onions had previously also banned for four years in relation to another company failure. The two bans will run concurrently.

Finally, there’s the case of Brett Jones, Andrew O’Dwyer and Loretta Jones, who were directors of BLA Trading Limited. BLA sold small electrical goods on E-Bay. The company went into liquidation in January 2011. an investigation found that the company had submitted incorrect VAT returns between December 2008 and June 2010. The returns disclosed VAT due of £3,140, whilst the true figure was £303,591.

Brett Jones has been disqualified for 9 years, O’Dwyer for 8 years, and Loretta Jones for 3½ years.

For a company that’s struggling with its cash flow, it must often be tempting to delay tax payments. After all, aren’t the priority payments to employees and to make sure that the company gets the supplies which are needed to keep trading? The message of these cases is that there may be long term consequences from the short term gain. And with the impending introduction of RTI, the chances of getting away with it for very long are even more remote.

For advice on company insolvency or for bankruptcy advice contact tri group today to speak to one of our highly skilled insolvency practitioners.