Tax efficient or tax avoidance?

As a director you are probably advised to pay yourself a nominal salary with the balance of your remuneration package being paid by way of dividend.  This is perfectly sensible.  It reduces the tax burden and improves cash flow.  However, what happens if you draw dividends when there are insufficient reserves?

There has been a long-running debate on whether dividends are unlawful when there are insufficient reserves to cover them.  Some commentators (like me) always took the view if a director followed independent and professional advice and the payment of dividends was a tax-efficient way of paying remuneration then it should be fine.  Indeed, in recent years court decisions on various matters (such as wrongful trading or malpractice) have generally looked at the position and adopted the view if a person took independent advice and followed it then they have done what any reasonable diligent person is expected to do, irrespective of whether that advice is flawed.

The above approach was continued in a case that was brought before the court where a sole director had drawn some £23,000 in dividends over a financial year.  The company went into liquidation with a deficiency in excess of £173,000.  It was recognised the director took independent advice and acknowledged if there were insufficient reserves then he would have to adjust his remuneration back to salary and account to HMRC for the PAYE/NIC as appropriate.  The court adopted a practical, common sense opinion and the claim against the director was dismissed.  The Applicant (who had “Purchased” the action from the liquidator) appealed.

In Global Corporate –v- Hale [2017] EWHC(Ch) the appeal over-turned the earlier decision, saying,

“If it looks like a dividend and sounds like a dividend, it is a dividend.”

The court of appeal added further clarification in order to clear the waters muddied by the High Court by reaffirming:

  1. Companies must have sufficient reserves to pay dividends at the time they pay them, whether or not they intend to rectify any deficiency at the end of a tax year;
  2. Quantum meruitwill not act as a defence or set off to claims made by companies against their directors;


Personally, this decision does not sit well.  After all, in some cases directors may have been taking dividends when something that could not have been reasonably envisaged extinguishes the reserves, automatically making those dividends unlawful.  That, to me, is using the benefit of hindsight, something the courts have frowned heavily upon in the past, making the Global decision a little contradictory.  I am sure there will be some that disagree with me on this but is that not what freedom of opinion is all about?

Should you have an insolvency-related issue or a corporate dispute then please contact Gary Pettit at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may send an email to or access our website at

Brexit vs Cash

How many readers like change?  Do you remember the constant barrage of doom and gloom surrounding the Millennium Bug or what about GDPR?  Let us face it, in general we all fear changes that may interfere with our comfort zone.

The “B” word has been with us for 2 years and, personally, I have adopted the position of why write about it?  After all, nobody knows what post EC departure means so anything written pre-Brexit surely must be rhetoric or simple guesswork.  Admittedly, the older generations know what it was like before we joined but times have moved on since then and the economic World is vastly different.

So, let us focus on what we do know.

I bet when asked about your salary you cite your gross earnings.  However, gross earnings cannot be taken into account when it comes to paying the bills; you have to look at your take home pay and hopefully it is sufficient to meet your domestic needs.  Similarly, in business there seems to be a heavy focus on the level of turnover rather than the net profit or, more importantly, cash flow and the ability to meet debts as they fall due.

Through 2018 the average amount owed to a company was £80,141 rising to £82,000 for professional services.  Late payments are the most significant threat to SMEs and the longer they remain unpaid, the higher the risk of an inability to collect.  If your business had to write off £80,000 how much additional business would you need to secure in order to recover that loss?  Going back to the salary scenario if your employer paid you late could you still meet your debts as they fell due?  There is little difference.

At PBC we would say most of our clients have suffered from poor cash flow.  Some are due to poor credit control, some through a slow burn as the business suffers for one of many reasons, while others fall victim to a one-off catastrophic write off.  In one particular case PBC are handling the company suffered a 7-figure debt as their customer went into liquidation, bringing the company to its financial knees.  Thankfully, the director took early advice and we had time to restructure his company via a company voluntary arrangement, safeguarding all of the employees and the company going forward.

So, our message to you is Brexit is currently uncertain whereas cash is king.  Look after your cash controls and let Brexit unwind in whatever format it is destined to take.

Should you have an insolvency-related issue or a corporate dispute then please contact Gary Pettit and PBC Business Recovery & Insolvency on (01604) 212150 or email to

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 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

Northamptonshire Business Leader to Take Centre Stage at National Awards

A leading Northamptonshire businessman will take centre stage at national awards that will take place at Wembley stadium.

Gary Pettit, the managing director of PBC Business Recovery has been selected as a judge for the SME National Business Awards 2017 which were launched in July 2017 as a result of the continued success of the SME Business Awards around the UK.

The awards are directed at SMEs which at 98% of all businesses are the main engine of the UK economy.

“I am delighted both personally and for PBC Business Recovery that we have been asked to undertake such an important role in this influential and prestigious Awards.” said Gary.

PBC Business Recovery and Insolvency is a specialist business rescue and insolvency practice that provides practical, helpful advice and solutions to a variety of businesses and individuals with financial problems.

“Entering awards are a fantastic way to grow any business.” Gary continued. “An SME only needs to reach the finals of the awards to experience their profile and their promotional opportunities.”

“This is a great opportunity for SMEs from across Northamptonshire to get to Wembley later this year and be part of an amazing evening that will see the cream of UK business crowned.”

Businesses can enter up to 3 categories. There will be a selection of highly experienced and respected judges and each entry is judged by up to 4 of our panel.

Finalists will be chosen following the preliminary judging and they will be announced online on 4th October 2017.

The awards will culminate in a glitzy black-tie final at the iconic Wembley stadium on 1st December 2017.

The evening of celebration will recognise all the finalists and allow every business that reaches the final the opportunity to promote their incredible achievement.

Further information on the awards can be found at

You can watch a video promoting the Awards at

PBC continue to support business

What is your most valuable business asset? I hope most readers will respond along the lines of,

“Our employees, of course.”

Last year the directors of PBC Business Recovery & Insolvency were delighted to support the Northamptonshire SME Business Awards. In fact, we were so pleased with it that we agreed to support the awards for 2017.  So, what does that have to do with the opening question?  Well, if you acknowledge your staff are your most valuable asset what are you doing to enhance the skill and efficiency of that asset?

The training and development of your staff can be one of the most astute investments a business can make. The more they learn, the more efficient they become and the more efficient they become the more competitive you will be in your field of trade.  Certainly, that has been our experience at PBC where I am not shy in claiming we have a team that is envied by our competition.  Meeting their training needs has brought success and, in turn, the staff have developed into a team that means they support one another in the challenges faced, with the result being PBC meet the expectations of advisors who refer clients to them.

So, why not demonstrate to the business world of Northamptonshire that you also push the training and development of your team.  Enter the 2017 awards and get the promotion you deserve.  You can read about the awards and obtain your application on

A look at personal guarantees

A look at personal guaranteesA recent survey by Wirefund revealed that over half (55%) of SME business owners do not know what a personal guarantee is. This certainly matches our experience at PBC as we see many cases where company directors cannot remember whether they signed personal guarantees or not.


What is a personal guarantee?

In the last decade, there has been a trend among creditors, including banks, finance providers, landlords and, increasingly, trade suppliers, to ask for personal guarantees. As the name suggests, this is a contractual promise to pay the liabilities of another. If you’re seeking a small business loan, for example, you might be asked to provide a personal guarantee of the loan. Such guarantees are unsecured, which means they are not tied to any specific asset such as property. For the lender, such guarantees make a loan agreement more secure, as responsibility for paying it back falls not just to the borrowing company but to the individual directors involved as well.


Why do they matter?

The unsecured nature of the guarantee means that you will be personally responsible for repayment of the loan in the event it cannot be paid back by the business itself. All your personal assets, therefore, are at risk, from the family home to cars. If you do not have sufficient assets to cover the debt, then you may be made bankrupt and with it encounter all the ongoing difficulties associated with a poor credit rating. It is also worth pointing out that if several directors give a personal guarantee to the same creditor, then the creditor does not have to take action against all of them and can instead choose to pursue just one.


It is clear that personal guarantees carry significant implications, and certainly, the courts have tended to take the view that the guarantor undertook the commitment with full knowledge of the facts. It is easy to sign up in haste in order to secure funding. However, it is important to seek advice in advance to ensure the full ramifications are understood should the guarantee be called upon. You may also want to consider personal guarantee insurance to provide some protection in the event of difficulties.



Should you find yourself in a position whereby your company is failing and you are left with personal liabilities, then there are a range of options to consider from personal insolvency procedures through to negotiation of a settlement. We offer a free, confidential, no-obligation initial consultation to discuss the issues you are facing.

Local Entrepreneur Wins Young Business Person Award

SME Northants Business Award_Gold Sponsor_2016

Fae Perkins, owner of Northamptonshire hair extensions business, Bond Hair, was crowned ‘Young Business Person of the Year’ at this year’s SME Northamptonshire Awards.

Fae, aged 29, set up her business specialising in professional hair extensions over 8 years ago and was also shortlisted in the Business Innovation and Entrepreneur of the Year categories at the awards ceremony which took place last Thursday evening.

The judges commented “Fae seems to have limitless energy linked to an impressive personal drive.”

Fae runs what she classes a ‘lifestyle business’ on top of holding down a full time position as Marketing Manager for prestigious self-build company, Potton. Fae has maintained and grown her loyal client base regardless of also being dedicated to her full time day job.

The Young Business Person award recognised business talent for those under 30 years of age and was sponsored by Northampton-based firm, PBC.

“I’m really happy that my hard work is recognised, I’m fortunate enough to love both my jobs so it isn’t a chore to work hard” continued Fae. “I never think 17 hour days are anything special, until someone points out that’s 2 days’ work for most people!”

The Young Business Person award was presented by Gary Pettit, Managing Director of Northampton-based business PBC, who said “PBC feel it is important to be part of the business community and were pleased to support this award. The economy needs young people in business and Fae is an excellent example”.

For further information on Bond Hair™ visit

How to avoid a Christmas cash flow crisis

How to avoid a Christmas cash flow crisisWhile some businesses, particularly in the retail sector, find that Christmas is their busiest time of year, for others it can be a difficult period. Factors such as lower levels of production due to increased holiday, decreased sales and, in some instances, total shut down for a week or two, can all have an impact. However, employees still need to be paid, and any loan repayments must be met and all these elements combined can have a negative influence on cash flow.
What steps can SMEs take to prepare for this? In this blog, we offer some advice.

Plan for extraordinary expenses

Christmas parties, staff gifts, bonuses and the like all add up. Employees will also often be paid much earlier in the month than usual. Make sure you plan and budget for this expenditure well in advance, so it doesn’t catch you out.

Delay unnecessary expenditure

Think carefully before making purchases and avoid buying big-ticket items if they can wait until the New Year.

Get paid

To maintain positive cash flow it is essential to invoice promptly and actively chase any late payments. In the run up to Christmas, this is more important than ever. If overdue accounts are not chased in late November or early December, then the chances are they won’t be paid until January at the earliest. Keep in mind that the person responsible for accounts may be taking extra annual leave and therefore may not be around to make payments. Likewise, if invoicing is delayed until after Christmas there will be a noticeable impact on cashflow at the end of February. Any delay in invoicing means a delay in getting paid.

Incentivise prompt payment

If there is room in the profit margins, consider offering a ‘Christmas discount’ for payment upfront or early settlement of the invoice and be clear on what the penalties are for late payment.
Maintain your cash reserves
Look at using the full payment terms you have agreed with your suppliers. At this time of year, there is little point in paying early, unless a discount is on offer.

Have a Plan B

If you can, build a cash buffer to help you through the period. If this is not feasible, then look at arranging alternative funding options such as a temporary business overdraft or loan.


To ensure your business does not start 2017 with financial difficulties it is important to plan ahead and have a proactive approach. Taking the time to assess your situation and predict any issues will pay dividends.