Following an initial conversation with KSA, our Regional Manager for Scotland and Northern Ireland, Derek Robinson, met with the company director at their plant near Glasgow to discuss, in detail, the problems the company was facing.
The company had a turnover of £150k, which was rising slightly on previous years.
The company was encountering financial difficulties because the director being the only employee of the company was responsible for all operational activities as well as administration of the company’s financial and corporate affairs.
This led to a slow, but steady decline in compliance and financial management, leading to a build up of VAT and to a lesser extent Corporation Tax arrears over a considerable period of time. The director readily acknowledged and accepted the need for significant change.
HMRC had issued various and numerous demands for arrears of VAT and began to take legal action to recover outstanding monies.
In addition Company’s House lodged an initial writ for a decree for payment of outstanding fines of some £6,000, which had been levied over a period of time for non-compliance and a failure to lodge various returns on time. The director managed to secure a time to pay arrangement, however, payments were to be over a 4-month period.
The director recognising that the company would have difficulty in making the third payment of this time to pay agreement, contacted KSA Group to obtain advice as to how to deal, with the company’s cash flow difficulties and the threats from HMRC for payment of outstanding monies and fines.
Before KSA were appointed, the director had been unable to deal with the mounting pressure while manage the daily workings of the business which is his forte.
KSA were appointed to assist with the preparation of a company voluntary arrangement (CVA) proposal and to assist with the recruitment of a party time bookkeeper/admin assistant to manage the on-going preparation of cash flow forecasts, management accounts and VAT returns.
The bank was not secured, as it did not provide any facility as the company operated a positive balance.
Total debt £97k including HMRC at £50k (c47%). This also included the balance of the Companies House fine that had been the subject of an earlier unaffordable time to pay arrangement
HMRC approved the CVA. The creditor’s meeting was held in Glasgow in September 2013 and the CVA was approved by the body of creditors with a dividend of 85p in £1.
The CVA meant that one job was saved and another part time role created, with the possibility of future development. More importantly perhaps, HMRC and other unsecured creditors will receive a dividend of 85p in £1 rather than 10p in £1 as would have been the outcome in liquidation.