Bankrupt paint company owes ￡160k tax bill
Tim Hammond
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The administrators of a paint coating company that collapsed following an accounting error have said that HMRC is owed over ￡160,000 in unpaid tax and VAT
Charnwood Paint Specialists called in Leonard Curtis as administrators on 14 August after a difficult period of trading due to inflationary pressures and a slow recovery from Covid-19 lockdowns.
The problems were compounded when the company’s in-house accountant failed to monitor and pay one of the company’s largest suppliers, InPlace Personnel Services, who in turn issued a winding-up petition against the company in January 2023.
Charnwood stated that the error with previously filed accounts had resulted in an erroneous tax liability, which was not considered payable by the directors.
However, this was disputed by HMRC, who argued that the business had accrued VAT and PAYE arrears totalling ￡162,314.37.
On top of this, the business owed over ￡769,499 to creditors when administrators from Leonard Curtis were appointed. They are unlikely to see any of the cash owed to them.
This included ￡114,318 owed to Bibby Commercial Finance, which provided an invoice finance facility to Charnwood. Collections of ￡23,882 have been made since the appointment, which have been paid directly to Bibby.
The liabilities to HMRC, which is classed as a secondary preferential creditor, amounted to ￡86,738 in VAT and ￡75,517 in PAYE.
The joint administrators’ report stated: ‘It was clear that the company was struggling to maintain control of its various liabilities, servicing of its legacy debts and this was materially affecting its cash flow position. Ultimately, the business could not continue to trade in the foreseeable future under its current structure.
‘HMRC rejected an informal time to pay arrangement. Shortly following this, a field agent from HMRC attended the company’s premises to meet with the directors and threatened to enforce control of goods in the absence of payment or a revised proposal to settle the company’s arrears.
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‘Directors were provided with a specific timetable in which to deal with the debt. If the company failed to engage, enforcement action was threatened by taking control of assets at the company’s premises or issuing a winding-up petition.
‘HMRC will rank ahead of floating charge holders and unsecured creditors in respect of certain unpaid taxes that the relevant company collects on behalf of HMRC.’
Charnwood was incorporated on 20 February 2017 and reported a turnover of ￡958,872 for the period ended 30 June 2023. The average number of employees was 20.
The business has since been sold in a ￡65,000 pre-pack deal by Arron Squires-Nugent, a director of the business, through a vehicle called Charnwood Coatings UK.
So far, ￡10,000 of the sale price was paid on 16 August 2023, with the remaining balance of ￡55,000 due to be paid on deferred terms.
MS Taxes says; as you know it is illegal to trade when insolvent. If you are unsure about the trading position of your company speak with your accountant. You are not meant to just carry on and trading your way out of a black hole – although it is what most do. If your accountant is rubbish and got you into trouble in the first place, you Know It Makes sense to give me a call.
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