In every liquidation the conduct of the directors is considered and if thought appropriate, the Insolvency Service has the power to apply to the court for a disqualification order. In this case, the disqualification prevents the director from managing or controlling any limited companies until July 2018.
Commenting on the disqualification, the Insolvency Service’s spokesperson said:
"Company directors have a duty to ensure businesses meet their legal obligations, including paying taxes. Failure to do so is not a victimless offence as it deprives the taxpayer of the funds needed to operate public services.”
“The Insolvency Service will take action against directors who do not take their obligations seriously.”
The Insolvency Service investigation showed that the director’s company failed to pay tax worth £78,108 between April 2010 and December 2012 to HM Revenue and Customs. During the same period, the company made payments to other parties of more than £600,000 with the director receiving almost £120,000 of these monies.
The company, which traded as a dispensing optician and ocular prosthesis specialist an address just off Harley Street, went into voluntary liquidation on 13 December 2012 with debts of £113,227.
A disqualification order has the effect that without specific permission of a court, a person with a disqualification cannot;
- act as a director of a company;
- take part, directly or indirectly, in the promotion, formation or management of a company or limited liability partnership;
- act as an insolvency practitioner; or
- be a receiver of a company’s property
Individuals who attempt to circumvent a disqualification order by having someone else act of their behalf, put both parties at risk of a criminal prosecution, if the ‘nominal’ director is actually under the control of the disqualified ‘shadow director’.
The Insolvency Service is responsible for administering the disqualification regime and takes action against approximately 1200 directors each year resulting in disqualification periods of between 2 and 15 years. Tax arrears due to HMRC are one of the easiest areas to target, as it is fairly straightforward to prove failure to comply with the rules. In this case the amounts involved were relatively small. Although the Insolvency Service refers to payments of £120,000 to the director, that was over a period of 2½ years, equivalent to a salary of £48,000, arguably comfortable but not excessive particularly in London. The tax arrears of £78,108 were also incurred over a similar period and it is probably that which prompted action. This case demonstrates that the consequences for non payment of tax, particularly over an extended period can be severe.