7 Year Director Disqualification for HMRC Debt and Not Keeping Adequate Accounting Records. 

This article looks at the severe consequences to directors who do not fulfil their legal duties, and the advice that we, as director disqualification solicitors, can give to help directors who find themselves in this position.

In this case, a recent Insolvency Service press release confirms that a Mr Trevor Shieff (‘Mr Shieff’) has received a 7 year director disqualification period for not keeping adequate accounting records and failing to make payments to HMRC.

The Details of this Director Disqualification Case – Non Payment of HMRC Debt.

On 13 February 2014, HMRC presented a Winding-Up Petition to the Sheriff Court in Glasgow to wind-up ESP Powder Coating Limited (ESP), of which Mr Shieff was a director for failing to make payments.  A Winding-Up Order was made against ESP on 20 March 2014.

The Insolvency Service then carried out an investigation and found that Mr Shieff caused ESP to trade to the detriment of HMRC from at least 01 January 2012 onwards in respect of ESP’s failure to maintain and provide VAT returns. The amount of VAT owed by ESP was just under £31,000.00. In addition, The Insolvency Service found that just over £30,000 was owed for non-payment of PAYE/NIC from 05 July 2011.

It would appear that ESP made no payments at all in respect of its liabilities to HMRC after 31 December 2011. As at liquidation, HMRC are stated to have been owed at least £61,000.00.

Failing to Keep Adequate Accounting Records Also Contributed to the Director Disqualification.

It was also found that Mr Shieff had failed to ensure that EPS maintained and/or preserved complete and full accounting records and/or that he failed to deliver such records, as legally required, for the period 01 January 2012 to 20 March 2014 (being the date of the liquidation).

As a consequence the Insolvency Service stated that:

–     It was not possible to verify the full and true nature of ESP’s business operations, its cessation of trading activity or to establish the identity and value of ESP’s assets.

– It was found that it was not possible to establish the full and true amount owed to HMRC in respect of VAT and PAYE/NIC.

–     There were receipts into ESP’s bank account totalling just over £60,000.00 that were unidentifiable from the accounting records.  In addition, there were payments made from ESP’s bank account totalling over £34,000.00 in period from 31 December 2011 to 30 December 2013 that they were unable to identify the recipients of or reasons for.

–     As at the date of liquidation, ESP had liabilities of a little over £79,000.00.

Cheryl Lambert, the Chief Investigator at the Insolvency Service said:

“Directors who do not comply with their obligations to [HMRC] and do not maintain adequate records can expect to be investigated by the Insolvency Service and enforcement action taken to remove them from the market place.

…Taking action against Mr Shieff is a warning to directors to take their duties seriously.”

An order was made by the Glasgow Sheriff Court that Mr Shieff be disqualified as a director for a period of 7 years.

Comment on This Director Disqualification Case

Mr Shieff’s disqualification for 7 years is a severe punishment, and one that is likely to be a considerable impediment to his business activities. It shows how seriously The Courts view directors not fulfilling their duties. One option open to him, however, is that he could seek the Permission of the Court to be a director in respect of specific, named companies during the life of that ban.

NDP will only advise a director to apply for permission to continue as a director if it appears there is a reasonable chance of success. 

NDP’s advice is that it is almost always appropriate to file representations and engage with the Insolvency Service at the earliest point possible to include (perhaps) having a meeting with them to personalise the case and try and explain the true position.

It is often the case that carefully crafted representations may cause the Secretary of State to reconsider their position and possibly even withdraw the threat of director disqualification proceedings. Here at NDP, we are well used to drafting those representations and representing directors in meeting with the Insolvency Service and their solicitors.

Contact Us if You Are Facing Director Disqualification

It is always the case that the earlier that you seek and obtain independent legal advice the better. Why not send to us today a copy of the letter that you may have received from the Insolvency Service threatening director disqualification proceedings against you? Call us on 0121 200 7040 or contact us for a free initial discussion.