Early advice aids survival of business

At PBC, we have written numerous blogs and articles about how taking early advice about a worsening financial situation can lead to more options being available and the earlier the advice is taken the more likely a recovery process can be instigated. This message was true in the recent administration of Noble Express Ltd.

The most common reasons why businesses fail

The company, which supplied catering equipment, cleaning chemicals and other non-food essentials to the hospitality industry, entered into administration on 16 January 2018. However, the board of directors first sought our advice in the autumn of 2017, at which point the sale of the company remained a genuine possibility.  Unfortunately, no sale could be secured but the traded during its busy period in the run up to Christmas.  The director then sought advice again at the beginning of January.

Following the company entering administration, the joint administrators (Gary Pettit and Gavin Bates of PBC) traded the business with a view to finding a buyer. Several expressions of interest were received and a sale of the business was secured in February.  The sale has seen the majority of the company’s employees retain their jobs as well as an increased return to creditors.

Gavin Bates said, “It is always pleasing to see directors take advice at an early stage when their company is faced with financial pressures and difficulties rather than burying their head in the sand only to emerge when it is far too late. In this instance, I was approached early enough to enable viable trading to occur whilst searching for a buyer.  The early approach ensured there was both cash available to fund trading and stock in the company’s premises which meant I could trade without seeking further supplies from creditors.  I am delighted with being able to secure a sale of the company’s business and assets, and look forward to distributing the funds I am holding to creditors”.

CHARITY QUIZ A GREAT SUCCESS

Greens Restaurant was filled with the sound of brains whirring as fourteen teams did battle at PBC’s charity quiz in aid of Ronald McDonald House at Alder Hey.  It was a night which saw the teams discover 12 is the only number which scores itself in Scrabble and 23 is the next number in the sequence 1, 40, 4 and 3.

The winners were Hewitsons (below), with a score of 128 out of a possible 150, with Tollers taking second place only 3 points behind in a good night for the lawyers.

PBC would like to thank everybody who attended and made the event such a success, with £1,799.88 being raised for charity as PBC have covered the costs for the evening.

The team’s tuck shop has also raised £71.29 so far this year, bringing 2018’s current total raised to £1,871.17. Further details about the abseil and other events will be released shortly.

And 23. Motorways with M25 junctions (anticlockwise around the M25).

Time to pay thanks to Carillion?

Following the demise of Carillion, HM Revenue & Customs have announced their Business Payments Support Services are open to approach by any company or business that has suffered a short-term cash flow problem as a result of the large scale failure.

The Support Service will consider:

  • Instalment arrangements of tax due that cannot be paid on time;
  • Suspension of recovery action/proceedings;
  • Review penalties for missing statutory deadlines;
  • Reduce any payments on account;
  • Agree to defer payments due to short term cash flow difficulties.

 

Should you find yourself facing difficulties to meet your tax liability as a direct result of the Carillion failure then you may apply to the Support Service on 0300 200 3835 or go on the website at www.gov.uk and search “Dealing with HMRC-payment problems.”

The obvious question this raises is, “Why is this offer being made for Carillion creditors?” At PBC we believe this could set a precedent for others who are caught under an insolvency process.  After all, what is different between a supplier losing (say) £5,000 in the Carillion liquidation to that under “Standard” UK liquidation?

At PBC we are often approached to assist companies with addressing tax issues whether in respect of trying to secure a time to pay agreement or by other formal means where appropriate. Should you require advice in this respect then contact PBC and speak to one of our insolvency practitioners on (01604) 212150 or email info@pbcbusinessrecovery.co.uk.

PBC announce Charity Quiz

 

PBC are pleased to announce a charity quiz to raise money for Ronald McDonald Charity Houses.

The quiz will be held on Wednesday 21 March 2018 at 6pm at Greens Restaurant, Collingtree Park Golf Club.

For further details about the evening, please find the invite and booking form here.

For further details about why PBC support the charity, please click here .

Second Edition of The Leaf Released

PBC are pleased to announce the release of the second edition of The Leaf Magazine, which can be read here.

Topics in this edition include:

  • Beware the Unregulated Insolvency Advisor
  • Focus on Mediation
  • Statutory Interest on Corporation tax in Solvent Liquidations
  • And Many More

A Round Up of Recent Insolvency Statistics and Perhaps More Trouble Ahead!

Last week The Insolvency Service released the insolvency statistics for the fourth quarter of 2017. Whenever these are published, the newspapers will always look for the story without going into the details.

So for example, the press reported that personal insolvencies in 2017 increased by 9% as compared to 2016, Of course that is correct, but they didn’t report that personal insolvencies fell by 11% in Q4 2017 as compared to Q3.

It is of course true that when inflation is higher than increases in wages then it will have an effect on individuals’ surplus income and in many cases (99,196 in 2017), will lead to personal insolvencies. In the short term this is expected to continue.

Another story that didn’t seem to hit the headlines was a 2.5% rise in corporate insolvencies in 2017 as compared to 2016. First this is a small increase in any event. However, it should also be noted that corporate insolvencies have been at a historically low number for a few years now, so a small increase on what is already a small number is not worth mentioning.

So this all seems like reasonably good news for the economy as a whole. On face value it does but at PBC we are starting to see growing signs of trouble ahead.  Over the last 3 months we have seen a growing number of enquiries and work.  It is fair to say that the retail sector (the high street in particular), is struggling, partially because of the reduction in personal incomes., and also businesses which deal with discretionary spend items (for example, new car sales are down).

At some stage we also expect fallout from the Carillion failure as subcontractors and those further down the chain come to terms with the lost income and future work.

It was also interesting to see that the FCA has started to address the issue of interest only mortgages. The FCA estimate there are 1.67 million full interest only and part capital repayment mortgages in the UK and the most of these will conclude in the next 10 to 14 years. Clearly as these come to a conclusion it will have an effect on those consumers and therefore the economy.  Only time will tell.

As always if you or your business is starting to struggle we would always recommend that you take advice at an early stage. Initial meetings with PBC are free and confidential.

PRESS RELEASE – NOBLE EXPRESS LIMITED – IN ADMINISTRATION

Noble Express Limited, the Northampton based supplier of catering equipment, cleaning chemicals and other non-food essentials to the hospitality industry, has been placed into administration.

The company has experienced difficult trading conditions over the past two years, which affected cash flow and led to the appointment of administrators PBC Business Recovery and Insolvency last week.

The full level of debt is being quantified and known creditors have been notified of the administration. However, appointed administrator Gavin Bates of PBC is hopeful that a buyer can be found, and procedures are in place for the company to continue trading at this time.  Gavin added “Noble Express is well-known in the industry and consequently this has generated some interest in the purchase of the business.  We remain hopeful that we can secure the right buyer and Noble Express will be able to continue to build its reputation in the hospitality sector.”

It has been necessary to make two staff redundant, but the remaining 5 staff have been retained to assist with continued trading under the management of the Administrators.

For businesses interested in purchasing Noble Express Ltd, please contact Gavin Bates at PBC directly on 01604 212150 or gavinbates@pbcbusinessrecovery.co.uk and a Sales Pack can be despatched.

Statutory Interest on Corporation Tax in Solvent Liquidations

This blog is for accountants, tax advisors and directors who are considering a solvent liquidation, commonly referred to as a Members’ Voluntary Liquidation or MVL.

During the course of 2017 we have been informed of what appears to be a change of policy by HMRC in respect of statutory interest on Corporation Tax. HMRC now require the payment of statutory interest at 8% from the commencement of the liquidation on any CT that falls due for payment after that date, even if the normal due date for payment of the tax is not until after the commencement of the liquidation, and payment is made before the normal due date.

HMRC are relying on a decision in one of the Lehman’s cases for this change in policy. That case indicated that statutory interest was due on both future debts and contingent debts, and since CT payable on a normal due date after the commencement of a liquidation is a future debt then statutory interest falls due. Whilst that judgement related to an administration, HMRC are arguing that in view of the similarity in wording in the legislation it applies equally to liquidations.  The standard letter that they are sending to liquidators with demand for statutory interest says:

“Our understanding of the correct treatment of statutory interest derives from the decision of David Richards J in Re Lehman Brothers International (Europe) : Lomas v Burlington Loan Management Limited. In a supplemental decision he restates his conclusion that “interest under Rule 2.88 (statutory interest) is payable on future debts and on the amount admitted to proof in respect of contingent debts from the date on which the administration commenced”.

Rule 2.88 mirrors Rules 14.23 which applies to a winding up. We are also assuming that will also apply to others taxes, VAT, PAYE and NIC etc.

To make matter worse it is clear that HMRC themselves don’t understand or haven’t been made aware of the change of policy and so we are aware of cases where we have paid the statutory interest and it has been paid back to us. The current advice is to pay the CT to the normal office but send the statutory interest to HMRC’s MVL team!

Therefore if you are considering a solvent liquidation further planning will be required to calculate and more importantly pay any tax debts at the commencement of the liquidation or as soon as possible thereafter in order to minimise statutory interest.

Gavin Bates specialises in solvent liquidations, commenting on the change Gavin said:

“This is effectively a hidden tax on entrepreneurs since HMRC are receiving interest that would not be due other than for the decision to cease trading to permit the members to extract their capital from the company. I also find it very unfair that we have no notice of this change of policy.  I often sit with directors many months before my appointment as liquidator in order to plan the process so we will now need to calculate and pay the tax debts as well as many other factors which we work through”

If you wish to discuss this further please feel free to contact us for an initial free meeting which are confidential and impartial.

Restoration of Company Leads to Major Pay Out to Creditors

PBC are pleased to report that having already paid preferential creditors in full a dividend of 44.58 pence in the pound was paid to unsecured creditors in a liquidation that, at first, appeared to have no distributable assets.

The company was placed into creditors’ voluntary liquidation in 2010 and following closure of the liquidation the company was dissolved. PBC were subsequently approached to restore the company to the register and act as liquidators to realise the outstanding director’s loan of approximately £100,000 which was unrealisable in the previous liquidation.

With the assistance of Katie Summers, a partner at Howes Percival LLP, a successful application was made to restore the company to enable recovery of the loan and subsequently a payment to be made to creditors.

Joint liquidator, Gary Pettit, said, “It is always pleasing to see returns made to creditors but the outcome and “out of the box” thinking surrounding this matter was particularly pleasing. I must also place on record my gratitude to Katie for the advice and assistance received”.

A fool with a pen in hand!

The heading pretty much sums up my view of a director who grants a personal guarantee for company debts. I am possibly being a little harsh as giving a personal guarantee can sometimes be a non-negotiable term of contract or borrowing.

In the past I have seen directors who have guaranteed practically every supplier, making you question why they are trading under the vehicle of a limited liability company. Others sign personal guarantees unwittingly; only to discover what they have committed to after things have gone wrong.

One of the biggest misgivings relates to the small loan guarantee scheme. Guarantors are informed the Government will guarantee 75% of the outstanding debt if things go wrong.  The problem is the “Outstanding debt” is any residue debt AFTER the bank have exhausted all avenues of recovery, including enforcement of any personal guarantees.  The last time the Conservative Party were the shadow government I was asked to advise on these schemes and my recommendations actually went into their manifesto.  Unfortunately, the scheme has still not been amended so would-be guarantors of these loan schemes need to be aware of the consequences of your business failing.

Should you be faced with a personal guarantee being pursued the advice must be that you seek independent professional advice without delay. Maintaining a clear and regular dialogue with the guaranteed company can help but an independent advisor can also look into the validity of the guarantee generally and assist you in reaching a mutual settlement rather than staring down the barrel of bankruptcy.

If you require any advice or assistance on any insolvency-related matter then please contact Gary Pettit or Gavin Bates at PBC Business Recovery & Insolvency on (01604) 212150.