Dominic Chappell, Crown Debt and Director Disqualification

Dominic Chappell Arrested by HMRC for Alleged Non-Payment of Crown Debt.

On November 2nd 2016 it was widely reported that Dominic Chappell had been arrested by HMRC for alleged non-payment of Crown Debt. Mr Chappell, who led the team that acquired BHS from Philip Green last year, is reported to owe HMRC more than £500,000 through his company Swiss Rock. This article looks in a little more detail at this case, and also reports that non-payment of Crown Debt (VAT, PAYE, Corporation Tax, etc.) is the largest cause of Director Disqualification in the UK.

How Much is Owed by Swiss Rock to HMRC?

Mr Chappell was arrested in a dawn raid that related to Swiss Rock (now in liquidation) owing HMRC £365,000 in VAT and £196,306 in corporation tax. It was reported subsequently that Mr Chappell had been released. HMRC has not commented on the case, but Mr Chappell said back in September when the amount owed came to light that:

“….there was a return that was made in error, they have acted upon it and we are rectifying that as we speak.”

Obviously we cannot comment on, or speculate about, the outcome of this specific case. What we do know is that HMRC and the Insolvency Service will pursue directors involved in Crown Debt cases following liquidation because it is  ‘in the Public Interest’.

How Many Directors are Disqualified for non-Payment of Crown Debt?

The most recent figures available from the Insolvency Service show that in 2014/15, more than 680 directors were disqualified under section 6 of the Companies Director Disqualification act of 1986 for non-payment of Crown Debt at the date of liquidation.

This is a significant number. Indeed, Crown Debt cases are easily the biggest source for an allegation of unfit conduct that the Insolvency Service relies upon when seeking a director disqualification. The Insolvency Service is very strict in this area, because it takes the view that the non-payment of Crown Debt ultimately impacts on all ‘law abiding tax payers’ and deprives the Government of funds for public expenditure. In addition, the Crown has priority for its debts over all other creditors.

What can be done if facing Director Disqualification for Crown Debt?

We suspect that many of the disqualifications obtained for non-payment of crown debt  are likely to be undertakings, where the director accepts a disqualification before Court Proceedings begin. This might well be because the director expects a long and expensive legal battle if the case goes to Court.

However, it also means that the case against the director does not get scrutinised or challenged in Court. It is our experience that director disqualification for a Crown Debt at liquidation is not inevitable. This is because:

  • The debt might not be the result of unfit conduct. Quite often liquidation occurs despite the very best efforts of the director to avoid it. For this reason, a key part of defending a director facing disqualification is to make sure that all details of the case are gathered, scrutinised and presented to the Insolvency Service in a structured way.
  • If the Insolvency Service can be persuaded that to continue with disqualification proceedings is not in the public interest, then the chances are that it will drop the case.

Clearly the outcome depends on the details and circumstances of each particular case. However, our director disqualification solicitors are experienced in defending directors and dealing with the Insolvency Service. We also know that the earlier you talk to us, the more we are likely to be able to help.

If you are facing director disqualification investigation for non-payment of Crown Debt, contact us or call us on 0121 200 7040 for an initial FREE chat about your case. No hole is to deep for us to be able to make a difference.

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