December 17th, 2019 / Insight posted in Case Studies

Recovery Matters winter 2019

Ian Robert, Partner at Moore Kingston Smith Licensed Insolvency Practitioners welcomes you to the winter edition of Recovery Matters.

We are delighted to share our new look Recovery Matters with you, where we provide insight into our work through a series of case studies. You can count on us for practical solutions to topical issues and everything in between. If you want to keep up with everything we do, please follow us on LinkedIn for regular updates.

In this edition we are focusing on liquidations and related tax issues. Please don’t hesitate to contact us if you require assistance on any business recovery or insolvency related matters.

 

Settlement for directors against HMRC

Insolvent liquidation

A company went into insolvent liquidation where material liability related to tax considered due by HMRC on an EBT scheme that dated back to 2005.

Despite sketchy evidence and the directors taking robust advice at the time, there was a case to be answered with no certain outcome.

Funding is always an issue. We worked with the shareholders, their lawyers and HMRC to agree a settlement which was acceptable to all parties. This avoided lengthy and costly litigation that had no guarantees of success for either side.

HMRC obtained a settlement and agreed not to take personal action. The directors ended what was a very worrying issue for them by paying an affordable sum, which was a small proportion of the HMRC claim, penalties and interest.

 

Tax refund due on overdrawn director’s loan

Liquidation

Moore Kingston Smith Licensed Insolvency Practitioners was appointed liquidator of a company that provided driver training courses in the logistics sector.

The only material asset was an overdrawn director’s loan account. However, given the large amount outstanding, this would need to be paid in instalments over time. The director had personally guaranteed the liability to the secured creditor, who placed pressure on both the director and the liquidator for repayment.

If the secured creditor took action against the former director personally, it could jeopardise his ability to repay the loan account and detrimentally affect the position for creditors in the liquidation.

We carefully managed the relationship with the former director and the secured creditor, to agree a suitable repayment plan that would maximise realisations and allow for interim dividends to be paid to the secured creditor, with preferential creditors paid in full. The former director also avoided bankruptcy.

Now the loan has been repaid, there is tax relief due to the company. We are working with the company’s accountant to both claim this relief and reduce HMRC’s claim in the proceedings, which were based on assessments, to reduce any set-off.

Once the tax refund is realised it is anticipated that the secured creditor will be paid in full and there will be a small dividend to unsecured creditors.

 

2019 predictions

How did I do?

  • Andy Murray retires from tennis – incorrect. He is now the six million dollar man, or probably worth a lot more.
  • Theresa May resigns – correct
  • Trump resigns on ill-health grounds or is impeached – watch this space

2020 predictions

  • England wins the Euros amidst football-mania in a summer heatwave (wishful thinking!)
  • Troubles on the Irish border
  • China invades Hong Kong