The three directors of 121 Accident Management Ltd, Constantine Nicholas, Glenn Thwaites and Mark Jenkins have been disqualified for 5 years each for undertaking retrospective accounting transactions to convert their drawings from the company into salary, to avoid the repayment of the balance on their director's loan accounts
The disqualifications, which run from 26 January 2016 for Mr Nicholas and Mr Jenkins and from 12 January 2016 for Mr Thwaites, prevent them from directly or indirectly becoming involved in the promotion, formation or management of a company for five years.
The three directors initially disclosed combined salary amounting to 21,204 to HMRC for the 2011/2012 tax year and 22,464 for the 2012/2013 tax year. No tax was payable on these sums. On 20 November 2013 the three directors met with the companys accountant and were advised to seek insolvency advice. They were also informed that any outstanding loan accounts would be repayable on the liquidation of the company.
On 4 and 5 December 2013 amended returns were submitted to HMRC declaring combined salary for the three directors of 441,204 for 2011/12 and 442,464 for 2012/2013. These returns incurred a further PAYE and NIC liability for the company amounting to 448,211.
Accounting records provided have been inadequate to disclose the full extent of the directors loan accounts prior to the retrospective accounting treatment, however it is clear that the balance on the accounts stood at, at least 102,866. This amount was not paid over to the Liquidator for the benefit of the companys creditors and any other potential distribution of assets amongst the companys creditors was diluted by the creation of an additional, significant PAYE/NIC liability in respect of the directors drawings from the company.
Rob Clarke, Group Leader of Insolvent Investigations, part of the Insolvency Service, said:
The Insolvency Service and Business department will take firm action when we find that directors have not acted in the best interests of a company and its creditors. This disqualification should serve as a reminder to others tempted to retrospectively manipulate the tax treatment of their drawings for their own benefit that the insolvency service will rigorously pursue enforcement action against them.