Many company directors are far from alone when they allow their company to be in significant arrears with payments to HMRC for VAT, PAYE, Corporation Tax or CIS.
Often seen as the creditor to pay last, delaying payment to HMRC is a risky strategy to employ and has inherent risks. These risks are threefold: firstly the company’s ability to trade could be removed, secondly the directors’ veil of limited liability could be challenged and thirdly directors run the risk of disqualification.
In opting not to pay HMRC and prioritise other creditors, the directors will be, in the eyes of HMRC and Insolvency Practitioners, treating the Crown purse as an unauthorised overdraft. In the current climate this is frowned upon to say the least.
Failure to discharge arrears to HMRC could result in their issuing a winding up petition whereby the company will likely enter into liquidation and its ability to trade will be curtailed almost immediately upon the serving of the petition. HMRC have other remedies such as Walking Possession which is often utilised in the first instance.
Furthermore, the Company Directors Disqualification Act 1986 attaches particular significance to "non-payment of Crown debts to finance trading". In a formal insolvency, the Insolvency Service has the capacity to seek Director Disqualification Orders for a period of 2 to 15 years. Whilst there are a raft of differing matters of poor conduct which could lead to a disqualification, non-payment of Crown debts is a commonly utilised one. Recent examples include a 4 year disqualification for non-payment of two years’ worth of tax at £386,000 and a ban of 2 and half years for non-payment of tax at £186,000 over a 2 year period.
The lesson is clear, open communication with HMRC at the earliest opportunity. This will not only increase the prospects of continuing to trade but also likely decrease the prospect of personal liability or disqualification on the part of the directors. Addressed early enough, HMRC may show flexibility through schemes such as their Time to Pay.
May 12, 2010Contractor wins IR35 appeal after five years
An IT contractor scored a rare victory at the HMRC Commissioners in an appeal against the tax departmentâ€™s interpretation of his service contract.
A tribunal decision published on Friday 7 May provides details of the decision in the Novasoft case brought by Novak Brajkovic against HMRC. Between August 1998 and December 2002, Brajkovic worked as a self-employed computer analyst/programmer with Avecia in a deal arranged through the agency Lorien.
Under the IR35 legislation introduced in April 2000, HMRC served formal notices on Novasoft in 2005 under the Income Tax (Pay As You Earn) Regulations 2003 and formal decisions under section 8 of the Social Security (Transfer of Functions etc) Act 1999 based on its determination that Brajkovic was effectively a “disguised employee”.
Of particular note in this instance was that Novasoft used the HMRCâ€™s IR35 assistance service to check whether the IR35 legislation applied its circumstances in January 2002. HMRC officials undertook further enquiries - including interviewing managers at Avecia - that ultimately led to the assessments issued in 2005.
HMRCâ€™s stance was that “Brajkovic did not present an image of a businessman offering his services to the marketplace; rather, of someone comfortable working for the same client on terms equivalent to employment.” As the two sides could not agree, the case eventually ended up in front of the Commissioners.
Brajkovic gave no formal evidence at the hearing in December 2009, but acted as his own advocate. Doing so denied HMRCâ€™s representative the opportunity to cross-examine him formally, but the Commissioners accepted the arrangement was satisfactory.
Story from: accountingweb
February 10, 2009Road accident victims 'bullied into settling' by insurers
Motor accident victims are facing high pressure tactics from insurers to settle for less compensation than they are entitled to receive, a leading accident lawyer said this evening.
But the Financial Services Authority was "turning a blind eye" to their plight, Amanda Stevens, President of the 4000-strong Association of Personal Injury Lawyers, said.
In one case, a woman was offered £1000 immediately after an accident if she would settle without using lawyers, Ms Stevens said.
"She declined and the offer was increased to £1700. She then instructed my firm. We valued the claim and achieved settlement that was more than 1000 per cent greater than the first offer, plus her legal costs."
Ms Stevens, addressing the association's annual dinner in London, said that accident victims were being let down by "weak financial regulation of certain insurance activities".
"It's not OK for the Financial Services Authority to turn a blind eye to high pressure tactics seeking to persuade people at their most vulnerable of the benefit of independent legal advice.
"These are not isolated anecdotes, but issues that trouble us day in, day out in our offices."
Similarly, victims of crime were being let down weak or non-existent regulation. She called on Jack Straw, the Justice Secretary, to address the failings of the Criminal Injuries Compensation Scheme.
"[Mr Straw] has spoken many times of his concern for victims of crime. While the purpose of the scheme is admirable, it is complicated and drawn out, with only one-third of crime victims actually aware that they can claim compensation."
The Public Accounts Committee had also recently noted that nearly one in five of victims found the application form too long and complex to complete; and only one in 20 of those eligible to apply do so in the first place, Ms Stevens said.
Other injured people were also suffering from bureaucracy or gaps in the compensation process, Ms Stevens added.
In the workplace, thousands of injured people could not trace their employers' insurers and so had no remedy for the harm they have been caused just by doing their jobs, she said.
The reason was the "lack of will to set up a comprehensive database of insurance policies, supported by a fund of last resort", where no policy could be traced.
"Such a database is only available for motor policies," she said. "This seems a glaring omission and one where APIL is working alongside others for change."
Bereaved people were also being let down, Ms Stevens added. There was a lack of legal aid funding for inquests, which was only granted in "exceptional" cases: in one case it took a battle of eight months to secure funding.
Finally medical accident victims were being failed by hospital trusts who were still reluctant to make early apologies to those they had injured, she added.
"Why, in the most poignant of circumstances, did my clients, who lost a child through culpable clinical error, have to wait almost 2.5 years, before an apology was finally offered and even then, only after persistent requests."
Ms Stevens said she was proud however to head an organisation which put people before the "pursuit of financial gain" which had led "so many in the city to the brink of collapse."
Story from: Times online
December 9, 2008CLAIMS AGAINST UNINSURED MOTORISTS
Until the 8th November 2008, if your vehicle was damaged by an uninsured motorist and you made a claim against the Motor Insurers Bureau, a £300.00 "deductible" applied against non-injury related losses.
This meant that in real terms, you could not recover the first £300.00 of your loss so if you were a claiming only a policy excess of £500.00, you would receive £200.00 and if your claim was worth less than £300.00, this fell below the threshhold so you were unable to apply to the Bureau at all.
This had the effect that many Claimants could not preserve their No Claims Discount as their uninsured losses were not recoverable other than directly against the uninsured driver who frequently would not have had the means to pay.
The good news is that the deductible has been been abolished but only in regard to accidents occurring after the 7th November 2008.
The MIB Uninsured Driver scheme consequently now places such Claimants to a very large extent in exactly the same position as those who have had accidents with insured motorists.
Story from: Recovery First
September 17, 2008Causing Death by Careless or Inconsiderate Driving
This offence, introduced in the Road Safety Act 2006 finally became law in August. The Act defines “careless” as falling below the standard of what would be expected of a competent and careful driver.
Examples of situations where a driver has been convicted of careless driving include: Signalling one way and then carrying out a different manoeuvre; failing to take precautions at a junction with restricted visibility and crossing into the path of an oncoming vehicle; reading a newspaper whilst driving; applying brakes causing wheels to lock
It also includes, driving inappropriately close to another vehicle; turning on a radio; and selecting and lighting a cigarette. In applying the competent and careful test courts have traditionally set the bar at a very high standard, which unfortunately means it is very easy to convict of this offence.
The fact that another road user may be partly to blame is not necessarily a relevant factor to be taken into account when considering guilt. The court is confined to considering whether the driver has met the required standard. Fault of another may be relevant in mitigation.
Inconsiderate driving includes flashing lights to force other drivers to give way unnecessarily; remaining in the overtaking lane; driving with undipped headlights; splashing pedestrians by driving through puddles; and driving a bus in a way that alarms passengers.
If charged the driver can be dealt with in either the magistratesâ€™ court or in the crown court. The offence attracts a maximum sentence of 5 years imprisonment. The sentencing council has issued guidelines dividing the offence into 3 tiers of seriousness.
At the top end is a course of driving that is so careless it falls only marginally short of being dangerous. At the other end of the scale is a course of driving where the level of culpability is low e.g. momentary inattention, misjudging the speed of another vehicle, turning into the path of another vehicle without seeing that vehicle. All other cases fall into the intermediate category.
Aggravating features which would lead to a higher penalty include driving at excessive speed, carrying out other tasks whilst driving, carrying passengers or heavy load, tiredness, high level of traffic and location e.g. near a school. Mitigating features that would reduce the penalty are minor risk, inexperience of driver and sudden change in road or whether conditions.
If convicted the driver must be disqualified, although if he can successfully argue special reasons for committing the offence e.g. emergency, shortness of distance driven then the court can endorse the licence with 3 -11 penalty points. The court can order the offender to take an extended driving test.
For a first time offender the recommended penalty is as follows:
1. For offences in the most serious category defined above -15 months imprisonment although the window for sentencing will be in the region of 9 months to 3 years imprisonment. This type of case would have to be dealt with in the crown court.
2. For offences that fall in the intermediate category the penalty will range from a community sentence to 2 years in custody with a recommended penalty of 9 months imprisonment. This would also have to be dealt with at the crown court.
3. For offences falling in the low category of seriousness a community penalty e.g. community service is recommended - and can be dealt with at the magistratesâ€™ court.
Having dealt with many careless driving cases over the years, it is clear that if death occurs not only does it have an unbearable impact on the family of the deceased but also the guilty driver.
Until recently a driver would face a fine and penalty points - that is no longer the case. Everyday pressures can cause us to make a simple error, which could have life changing events.
I have heard judges describe cars as lethal weapons which must be driven with care, the new legislation with the introduction of much harsher penalties, shows how seriously this type of incident is now being treated.
Further reading: Stephen Thomas Law
September 2, 2008WHAT HAPPENS WHEN YOUR EMPLOYEE IS INJURED IN A ROAD ACCIDENT?
OK, so it wasnâ€™t their fault “does it really matter to you? After all, even if they were off work for a month, you can get the wages you pay them back from the other driverâ€™s insurers” right? WRONG!
Most companies large or small fall into this trap. Only your injured employee has the right to claim loss of earnings and any wages you pay them either contractually or out of the kindness of your heart cannot be recovered by you.
WHATâ€™S THE SOLUTION?
Any earnings paid by you can be recovered from the negligent driver but only if your contracts of employment provide for this. Ask your company solicitorsâ€™ employment department to draft the necessary wording and this could result in your company recovering substantial sums without your employee suffering financially. This can include all the wages you would normally be obliged to pay under the contract of employment.
Alternatively, if your contract of employment does not yet provide for this, you agree with your employee to pay them not a penny over their contractual entitlement but you can then enter into a loan agreement with them (preferably drafted by your lawyers) for the same amount as their wage (or any other amount to tide them over) on the basis that they will repay you when they are paid by insurers of the other driver. This must not however be paid as wages. It should be simply a repayable loan.
WHAT HAPPENS WHERE THE EMPLOYEE IS FULLY OR PARTLY TO BLAME?
If your employee caused the accident, they cannot recover any loss of earnings, in which case nor will you, the employer. If however, fault is split between your employee and the other driver, they will each recover a percentage of their losses and normally (depending on the wording of your contract) you would only be entitled to recoup that same percentage of the wages paid.
If you are entering into the loan arrangement, you will need to consider carefully whether your employee can recover all the lost wages.
In reality, motorcycle couriers are more prone to split liability accidents that van drivers.
GET PROPER PROFESSIONAL ADVICE
Before embarking on any of these suggestions, get legal advice to ensure that the wording used protects you and your employee.
If your employee is using the same solicitors as you (assuming there is no conflict of interest), the employee can sign a form so that wage loss is paid directly back to you.
If your company solicitors do not have a specialist employment department, contact us and we will put you in touch with solicitors who can arrange this for you.
August 27, 2008New Personal Injury service
We are pleased to announce that we now have an arrangement with specialist person injury solicitors, asb aspire llp to handle personal injury claims on behalf of our clients where they need assistance.
You can notify us on line and we shall be developing this scheme further with asb aspire llp and organisations that work with them to include a fleet management package.
Please click here for further details.
Get in touch
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D G Owens
Chartered Management Accountant
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Berkshire SL4 2PU
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