Director of Subway franchise banned after undercover operation revealed suppression of VAT due
Jasmina Gordhan has been disqualified from acting as a director for seven years for not properly dealing with the taxation affairs of Leatherco throughout its trading, resulting in at least £169,286 being due; and not ensuring adequate and complete accounting records were maintained.
The Disqualification follows an investigation by the insolvency Service
The Secretary of State accepted an undertaking from Ms Gordhan on 7 March 2016, not to act as a director of a limited company for 7 years from 28 March 2016
The investigation found that Leatherco had not submitted any VAT returns, but had been paying artificially low assessments of VAT. This hid the true position and allowed the company to continue trading using that undeclared tax as a reservoir of working capital. This came to light following an undercover HMRC operation that established that Leatherco had been paying 7.5% of what should have been paid. Once the true position was clear, Ms Gordhan didn’t not do anything to ensure that either the tax affairs were brought up to date or that any more payments were made to HMRC. Leatherco then went in to liquidation after the business and assets were transferred, before a liquidator was appointed, to another company of which Ms Gordhan was a director. Leatherco’s records were not delivered up, so it isn’t possible to identify the recipients of, and reasons for, £612,432 expended from the bank account; nor what happened to assets that had been valued at £87,371 in accounts to December 2012 and subsequently sold to the connected company for a purported price of £9,675.
Leatherco Limited was incorporated on 11 November 2010 and started trading on 1 February 2011 as a Subway franchise in central London. Leatherco entered liquidation on 1 September 2014. The Statement of Affairs sworn by the director disclosed assets totalling £5,555 and liabilities totalling £21,584. The liquidator realised assets totalling £9,385 and established that the liabilities totalled at least £169,785.
The Insolvency Service investigation also found that:
- Leatherco had not submitted any VAT returns during its trading, between February 2011 and March 2014
- Leatherco paid VAT assessments on time for the VAT quarters 07/11 to 10/13, and paid all but £464 of the assessments raised, which totalled £5,788
- HMRC sought to arrange an inspection, which was ignored, and gave formal notice for the documents and information to be provided. The company ignored that request
- an undercover test purchase exercise was carried out by HMRC at the Leatherco’s premises during November and December 2013 and established that the VAT had been under-assessed by at least £83,052
- Leatherco didn’t file any further VAT returns, nor make any further payments and further assessments were raised totalling £43,030
- Leatherco made payments to employees throughout it trading totalling £84,061.79, declaring £3,596 being due in relation to PAYE/NIC
- during the period from 07 September 2011 to liquidation, Leatherco received £613,871 into, and paid £612,432 out of, its bank account
- in the same period it made payments totalling £9,723 to HMRC in respect of all its tax liabilities
- the company records were inadequate such that it was not possible to identify what was paid to who and who; how much was really owed to HMRC nor full and true value of the Company’s assets sold to a connected company of which Ms Gordhan was a director, on 15 March 2014 for £9,675 which had been valued at a £87,371 on 4 December 2012
Leatherco’s share capital totalled £1. Upon cessation of trade, and prior to the appointment of the liquidator, the business of Leatherco was transferred to a company of which Ms Gordhan was a director
Commenting on the disqualification, Cheryl Lambert, Chief Investigator at the Insolvency Service, said:
This is a significant ban reflecting the severity with which the Insolvency Service considers the conduct of the director. Ms Gordhan was the sole director and thereby responsible for all its activities.
Directors of companies are required to have control of, and exercise independent oversight over, the operations and finances of the business.
Given the income placed within the company bank account, which itself is incapable of being considered the full turnover and the lack of records relating to cash sales, no competent, active and alert director could have concluded that the amounts of VAT assessed were reasonable and accurate.
Ms Gordhan’s conduct of Leatherco’s affairs fell short of the standards of competence and integrity expected and to protect the integrity of the Market, the Insolvency Service will use its powers to protect the business world when director’s act in this way.
Notes to editors
Leatherco Ltd (CRO 07436291) was incorporated on 11 November 2010. Its registered office was 95 Leather Lane, London, EC1N 7TS. It traded as Subway franchise from the same address.
Leatherco Ltd was placed into Liquidation on 1 September 2014.
Jasmina Gordhan lives in Harrow and her date of birth is August 1962.
The Secretary of State accepted an undertaking from on 7 March 2016. The disqualification commences on 28 March 2016.
A disqualification order or undertaking has the effect that without specific permission of a court, a person with a disqualification cannot:
- act as a director of a company
- take part, directly or indirectly, in the promotion, formation or management of a company or limited liability partnership
- be a receiver of a company’s property
In addition that person cannot act as an insolvency practitioner and there are many other restrictions are placed on disqualified directors by other regulations. Further information on director disqualifications and restrictions is available.
The Insolvency Service administers the insolvency regime, investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. It may also use powers under the Companies Act 1985 to conduct confidential fact-finding investigations into the activities of live limited companies in the UK. In addition, the agency authorises and regulates the insolvency profession, deals with disqualification of directors in corporate failures, assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees, provides banking and investment services for bankruptcy and liquidation estate funds and advises ministers and other government departments on insolvency law and practice.
Further information about the work of the Insolvency Service, and how to complain about financial misconduct, is available.
All public enquiries concerning the affairs of the company should be made to: Cheryl Lambert, Head of Outsourced Investigations, Investigations and Enforcement Services, The Insolvency Service, 3rd Floor, Abbey Orchard Street, London SW1P 2HT. Tel: 0207 596 6117. Email: Cheryl.Lambert@insolvency.gsi.gov.uk.
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Published: 21 March 2016
From: The Insolvency Service