The Insolvency Service recently reported two cases involving directors of insolvent companies benefitting from company money while ignoring tax liabilities.
Jason MacDonald and Scott Darren McDonnell of recruiting company Longbridge PWM Ltd paid themselves £212,815 out of the company’s money which included £40,352 used to pay HMRC for their own personal liabilities.
The company went into liquidation in August 2013, owing nearly a quarter of a million to HMRC. The investigation also found the directors had withdrawn a total of £484,000 worth of dividends over 2011 and 2012, leading up to the insolvency.
Cheif Investigator from the Insolvency Service commented:
“Mr MacDonald & Mr McDonnell breached their duties as directors and caused HMRC to lose nearly £250,000 whilst they took over £200,000 from the company. Taking action against Mr MacDonald & Mr McDonnell is a warning to directors that their duties include considering the company’s tax liabilities before paying themselves.”
They have both been banned as directors for five years.
The second case involved Hampshire pub landlord, Nasser Ghesmati, who owed £178,000 in taxes to HMRC yet moved a large sum of money out of the company. He has been disqualified from directing for eight years.
The Investigation found Ghesmati transferred £580,530 of the company’s money between April 2012 and April 2013 and failed to account for this properly. The Fox and Hounds pub went into liquidation in April 2013, owing VAT, PAYE and corporation tax dating back to 2011.
It’s important for directors to fully understand their duties and act accordingly when a company is insolvent. Failing to act in the creditors best interests could result in personal liability and disqualification. Keeping up-to-date records and accounts is crucial.