The disqualifications, which run from 26 January 2016 for Mr Nicholas and Mr Jenkins and from 12 January 2016 for Mr Thwaites, prevent them from directly or indirectly becoming involved in the promotion, formation or management of a company for five years.
The three directors initially disclosed combined salary amounting to £21,204 to HMRC for the 2011/2012 tax year and £22,464 for the 2012/2013 tax year. No tax was payable on these sums. On 20 November 2013 the three directors met with the company’s accountant and were advised to seek insolvency advice. They were also informed that any outstanding loan accounts would be repayable on the liquidation of the company.
On 4 and 5 December 2013 amended returns were submitted to HMRC declaring combined salary for the three directors of £441,204 for 2011/12 and £442,464 for 2012/2013. These returns incurred a further PAYE and NIC liability for the company amounting to £448,211.
Accounting records provided have been inadequate to disclose the full extent of the director’s loan accounts prior to the retrospective accounting treatment, however it is clear that the balance on the accounts stood at, at least £102,866. This amount was not paid over to the Liquidator for the benefit of the company’s creditors and any other potential distribution of assets amongst the company’s creditors was diluted by the creation of an additional, significant PAYE/NIC liability in respect of the directors’ drawings from the company.
Rob Clarke, Group Leader of Insolvent Investigations, part of the Insolvency Service, said:
The Insolvency Service and Business department will take firm action when we find that directors have not acted in the best interests of a company and its creditors. This disqualification should serve as a reminder to others tempted to retrospectively manipulate the tax treatment of their drawings for their own benefit that the insolvency service will rigorously pursue enforcement action against them.
Notes to editors
Mr Nicholas’ date of birth is 13 August 1964 and he resides in Cheshire.
Mr Thwaites’ date of birth is 23 November 1981 and he resides in Manchester.
Mr Jenkins’ date of birth is 2.August 1961 and he resides in Manchester.
121 Accident Management Ltd (CRO No. 06526649) was incorporated on 7 March 2008 and latterly traded from premises in Salford in the provision of claims management services
All three directors were appointed from 7 March 2008 to 23 January 2014. The Company went into Creditors Voluntary Liquidation on 23 January 2014 with an estimated deficiency of £653,378.
On 22 December 2015 the Secretary of State accepted a Disqualification Undertaking from Glenn Thwaites and on 5 January 2016 , the Secretary of State accepted Disqualification Undertakings from Constantine Nicholas and Mark Jenkins all undertakings were for a period of 5 years. The matters of unfitness, which the directors did not dispute in the Disqualification Undertaking, were that between 20 November 2013 and 23 January 2014, the date of the Liquidation, they caused 121 Accident management Ltd to undertake retrospective accounting transactions to convert their drawings from the company for the tax years ended 05 April 2012 and 05 April 2013 to salary, and thereby subject to Pay as you Earn (PAYE) and national Insurance contributions (NIC), to avoid repayment of the balance on their directors loan accounts. These transactions were to the direct detriment of HM Revenue and Customs, increasing the unpaid PAYE/NIC liability at liquidation by £448,211. The conversion to salary of the drawings taken was in breach of their fiduciary duty to act in the best interest of the company creditors as at that time they had been advised by the company accountants that the company was insolvent and they were aware that the company would be unable to pay the liability incurred as a result of the conversion.
A disqualification order 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.
Disqualification undertakings are the administrative equivalent of a disqualification order but do not involve court proceedings. 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.
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