Business Financial Distress UK

Inquiry to Examine HMRC’s Approach to Tax Disputes

The UK Parliament’s Treasury Sub-Committee has launched an inquiry into HMRC’s approach to tax enquiries and tax disputes.

It highlights that in its code of governance for resolving tax disputes, HMRC outlines internal governance processes that are intended to ensure that it deals with all tax disputes fairly and in an even-handed manner.

The Sub-Committee’s inquiry aims to establish whether HMRC meets these standards in the way it conducts tax enquiries, resolves tax disputes and determines the amount of tax to be paid.

In particular, the Sub-Committee is seeking views on:

  • How do HMRC governance and settlement processes affect its ability to resolve tax disputes in a proportionate and fair way?
  • Does HMRC’s litigation and settlement strategy provide a rational and sound framework for resolving tax disputes?
  • Do HMRC’s collection and management powers set out in the Commissioners for Revenue and Customs Act 2005 provide HMRC with sufficient flexibility to achieve cost-effective and fair results?
  • Does HMRC’s approach to enforcing compliance with tax law, including its approach to penalties and other sanctions, result in disproportionate or unjust outcomes? If so, how can the situation be remedied?
  • Is there sufficient governance over the whole of HMRC’s enquiry process to ensure that HMRC’s interventions are well-targeted and that taxpayers are treated fairly and professionally throughout?
  • Do HMRC’s governance processes provide sufficient scrutiny and assurance for clearances and approvals given to taxpayers outside the formal enquiry process.

HMRC Aggressive Tax Demand Advice Glasgow Edinburgh & London

We understand that facing up to financial challenges can be extremely difficult and stressful. However, you should be reassured to know that there are options available and, with the right advice and support, you can take the necessary steps to improve your situation. For further information on our services then please contact us at an office near you.

Contains Parliamentary information licensed under the Open Parliament Licence v3.0.


HMRC Wins Tax Avoidance Case

HMRC has recently announced its success in a tax avoidance case worth £55 million that involved businesses issuing loan notes as bonuses to avoid tax.

According to HMRC, its legal victory over Cyclops Electronics and Graceland Fixing proved that a multi-million pound tax avoidance scheme used by over a hundred other businesses was a ruse to avoid paying tax.

The businesses used loan notes to pay company directors’ bonuses in an attempt to get around paying tax and National Insurance on their awards.

Specially created companies issued loan notes in £10 denominations that matched the bonus amount exactly. Special conditions were included to avoid the tax and National Insurance due when the loan notes were given to the director.

HMRC says the scheme was designed to take advantage of legislation that provides tax relief for genuine commercial transactions. This legislation has now apparently been amended to prevent similar situations arising in the future.

“We cannot allow tax avoidance schemes like these to deprive the UK of vital revenue,” said Penny Ciniewicz, HMRC’s Director General for the Customer Compliance Group. “The money we’ve protected in this case alone would be enough to pay the annual salaries of around 2,400 newly qualified teachers.”

HMRC says that it has won nine out of ten tax avoidance cases taken to court in the last two years, with many more settling before reaching that stage.

HMRC Tax Demand Advice Glasgow Edinburgh & London

We understand that facing up to financial challenges can be extremely difficult and stressful. However, you should be reassured to know that there are options available and, with the right advice and support, you can take the necessary steps to improve your situation. For further information on Alleged Tax Avoidance and Accelerated Payment Notices, please contact us at an office near you.


HMRC’s decision on the Eclipse partnerships

Following a review of their position in respect of the tax liabilities that apply in relation to the Eclipse tax avoidance scheme and having discussed the matter with a number of experts both internally and externally, HMRC have reached their decision in relation to how much tax partners in the scheme will have to pay.

As you may be aware HMRC challenged Eclipse Film Partners No.35 LLP on the basis that the partnership was not trading (despite claiming that it was) and therefore partners were not entitled to set off interest relief against their other income.  The First-tier Tribunal, the Upper Tribunal and the Court of Appeal confirmed this was the case.  In April 2016 the Supreme Court refused to hear the partnership’s appeal and therefore the decision became final.  During 2017, as a result of this decision, investors received Follower Notices and Accelerated Payment Notices, but these only requested that tax returns were corrected to remove interest relief set against other income, not against the partnership income.

HMRC have now reached the view that none of the interest relief claimed against partnership profits or other income is allowable, but the partnership profit share is still taxable.  HMRC are now in the process of finalising their liability calculation and will be writing to all partners in due course.

This could significantly increase the amount of liability owed by each partner.  Until the letters are received we have no way of knowing the difference this liability calculation will make.  However, based on a bankruptcy case where the APN value was in the region of £345,000 and the final proof of claim (including penalties, interest and Class 2 liability) from HMRC totalled in excess of £750,000…..I feel this calculation may push a number of partners in Eclipse from “wanting to pay” to “can’t pay”.

HMRC set up the Counter Avoidance Team in 2015 and the team now consists of over 45 trained Accountants, Tax Inspectors and professionals with both Insolvency and Legal backgrounds.  The team is litigating increased numbers of schemes each year and has collected in excess of £3 billion from users of tax avoidance schemes.

As per my previous blog there is still no doubt that public tolerance of tax avoidance is an historic low and for investors/partners in these schemes, it is a problem that is not going away.

HOW CAN WE HELP

At mlm we understand that facing up to financial challenges, such as tax issues can be very stressful.  We also understand that you may unwittingly find yourself on the wrong side of HMRC as a result of inadequately explained investment advice.  You should be reassured to know that there are options available and, with the right advice and support, you can take the necessary steps to resolve your situation.

Should you have received a demand from HMRC in relation to tax matters, please do not hesitate to contact me directly on 0141 228 1329, email: bmochan@mlmsolutions.co.uk or alternatively complete our online enquiry form.


DS (Slaughterhouse) Limited

Variety is the spice of insolvency life but on 26 January 2018 Maureen Leslie received an unusual and relatively rare appointment when she became interim liquidator of DS (Slaughterhouse) Limited. The appointment was made by HM Revenue and Customs.

Elaine Ramage, mlm’s corporate senior manager, and Daniela Coia, an assistant manager in the corporate team,  attended the premises in Dunblane when the court order arrived in our Glasgow office.

Elaine, who is a vegetarian, found  to her dismay, that the company was still trading, her arrival on site coinciding with a delivery of pigs.  She made a call to the office to advise Maureen of the position.

When a company is still trading, an insolvency practitioner will usually assess whether it should continue to do so as a going concern sale will generally provide a better return to creditors than a break up sale will.   DS (Slaughterhouse) was a family run business which had been trading for 40 years and providing slaughtering services for traditional family butchers across central Scotland and as far north as Oban and Pitlochry.  However, it was fairly clear that a combination of regulatory and environmental risk factors would not allow us to continue in this case - to say nothing of the pigs, which our on site staff insisted could be heard squealing.  The Company employed 10 staff many of whom had been with the Company since the outset.  All staff had to be made redundant.

The directors advised that the Company had traded successfully for a number of years however; latterly a combination of foreign meat imports and cheaper supermarket prices had a damaging financial effect on small abattoirs.

Our team at mlm can respond quickly to appointments across a wide range of sectors.  Our thanks go to Elaine and Daniela for dealing very efficiently with a challenging assignment.  If you are a creditor, or if you have a client who is owed money which is proving difficult to collect, we’d be happy to talk to you about your options.


Rise in UK Insolvencies Forecasted

A new report has forecast that insolvencies are to decrease globally by -1% in 2018, although the number of bankruptcies will remain higher than in 2007.

According to the Global Insolvencies Index by Euler Hermes, the UK will be one of the countries to experience an increase in insolvencies, with numbers forecast to increase by 8% in 2018.

It says that as Brexit approaches, importers and consumers have been affected by raising input costs and a weaker pound. The report highlights that the UK is an exception in Western Europe, where most countries should experience either a decrease or stabilisation in the number of insolvencies thanks to the economic recovery and supportive monetary conditions.

The Index also points out that despite the rebound in growth and trade globally, more and more domestic sectors are exposed to large business failures. In 2017, large insolvencies increased by +21% with notable increases in services, retail, agrifood and construction. According to Euler Hermes, competition and digital disruption help explain this trend and subsequent risks for suppliers.

“All in all, insolvencies are stabilising worldwide after seven years of decreases,” said Ludovic Subran, Chief economist at Euler Hermes. “This confirms the return of credit risk with the economic recovery. In 2018, companies in Asia, Latin America, Eastern Europe and the UK should be closely monitored. In addition, large bankruptcies are increasing fast as disruption in industries such as services and retail leaves no one unscathed. Mind the domino effect!”

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For expert legal advice on business insolvency and restructuring then contact our specialist advisers today.


Assistant Manager at mlm Solutions Achieves Insolvency Exam Success

We are pleased to announce that Barry Mochan, Assistant Manager at mlm Solutions, has recently passed the Joint Insolvency Examination Board exams and is on course to become a fully qualified personal insolvency practitioner with our firm.

All of us here at mlm Solutions are delighted by Barry’s success and we look forward to welcoming him as an appointment taking member of the IP team in the near future.


Concerns over Financial Audits of Charities

The Charity Commission has raised concerns over perceived failures by auditors to alert the charity regulator to matters of material significance identified in charity audit reports.

According to a recent review conducted by the regulator, of the 114 auditors who gave audit opinions containing information they were required to report to the regulator in the six months to October 2017, only 28 contacted the Commission.

The Commission says it is now working with the accountancy profession to raise auditors’ awareness of requirements and address this under-reporting, which it describes as raising a ‘significant concern’ about the adequacy of reporting to the Commission by auditors.

The regulator undertook the review to test compliance with rules that came into force from May 2017, extending the list of reportable matters to include modified audit opinions, such as paragraphs about an emphasis of matter or a material uncertainty regarding going concern – meaning there are doubts as to the charity’s ability to remain solvent.

The new rules are designed to help the regulator intervene in a more timely way, notably where charities face financial difficulty putting their future at risk. They follow the Public Administration and Constitutional Affairs Select Committee’s inquiry into the collapse of Kids Company, which recommended clearer guidance to auditors on the issues regulators expected them to report.

Of the 28 auditors who made a required report to the Commission, only six did so promptly, or within one day of signing the audit opinion; three waited more than two months to alert the Commission.

Contact Us

At MLM Solutions we understand that facing up to financial challenges can be difficult for organisations. However, you should be reassured to know that there are options available and, with the right advice and support, you can take the necessary steps to improve your situation. Contact us today to arrange a free, no-obligation, options review.


Meat Supply Company Enters Administration

A company that supplies meat to a variety of businesses, including hospitality, catering, schools and care homes, has gone into administration following an investigation by the Food Standards Agency (FSA).

The FSA investigation meant Russell Hume had to recall its meat products and many customers subsequently stopped using them as a supplier.

According to the BBC, the directors of the company said that the actions of the FSA had "created impossible trading conditions for us" and that it had no choice but to go into administration.

The administrators of the company, which has production bases in Fife, Liverpool, Birmingham, London, Boroughbridge and Exeter, have had to make 266 members of staff redundant. They are also currently seeking potential buyers for the business and its assets.

A statement on the FSA website said that:

“There is no indication that people have become ill from eating meat supplied by Russell Hume. However, we are concerned about the poor practices in place at their premises so that is why we have taken proportionate action to ensure no meat can leave their sites at present. We are continuing to assess the situation.”

However, the firm’s directors said that while they would cooperate with the FSA investigation, they felt that "its action has been out of all proportion to the concerns it says it has identified”, reports the BBC.

Administration provides the company protection from action taken against it by creditors and offers breathing space to consider a rescue plan. The administrators take over the management of the company and are responsible for realising assets on behalf of all creditors.

Administration Advice & Debt Recovery Glasgow, Edinburgh, London

For further information on Administration Advice for your company, contact us today at an office near you.


Is the Debt Arrangement Scheme still relevant?

It could be argued that the Scottish Government’s Debt Arrangement Scheme (DAS) has had its day.

Introduced in 2004, it has gone through many updates and changes over the years. With the introduction of a dedicated Business DAS in 2015, partnerships, trusts or an unincorporated body of persons can now also benefit from repaying debts over a number of years, the freezing of interest and charges and protection of assets.

However, even with those excellent features, the use of DAS as a problem debt management tool has dropped since it’s height in 2012/13.

We keep hearing in the news that there is a ‘Growing personal debt mountain!’, ‘The next crash is just around the corner!’ or about ‘Britain’s growing debt problem!’. If that’s the case what then are people doing to deal with their problem debt?

Some may use a formal insolvency option such as Sequestration (Bankruptcy) or a Trust Deed. If they have no assets this may be the best solution for them.

However If they have equity in property, or want to protect their assets, they may consolidate debts into their mortgage; with such current low interest rates this makes some sense. But, long term it’s really just accumulating more debt and if mortgage rates go up again, how long will it be before people find they are having difficulty trying to find that extra amount each month to cover the additional costs?

It’s been suggested that PPI claims may be a factor and people are using the money they get from these to clear or pay towards debts.

Another factor could be the use of Debt Management Plans (DMPs). These work in a similar way to a DAS, allowing people to repay debts over a number of years and freezing interest and charges with the creditors’ agreement. The criteria to enter one is less stringent than a DAS, however they don’t offer that guaranteed level of protection which comes with the Scottish Government backed Debt Arrangement Scheme. Creditors agreeing to a DMP can still take further action if they wish to do so or refuse to freeze interest and charges.

As the DAS is not yet available in England, DMP’s are still widely in use there.

So overall, is DAS less relevant today than it was a few years ago? In short I believe the answer is ‘No’. If anything, it’s more relevant.

As a tool for helping people and businesses repay problem debt, it’s not perfect, but the benefits would seem to far out way the detriments.

From the moment proposals are sent to creditors, interest, charges and fees are frozen and assets are protected. As long as debtors stick to the monthly payments creditors can’t take further action against them. If your circumstance s change and you can no longer meet your payments, the DAS can be varied or a payment break lasting up to six months applied for. If creditors object to the initial proposal the decision on whether or not to allow the DAS or BDAS to proceed is taken by the Accountant in Bankruptcy under the fair and reasonable test. Furthermore, it’s all backed in statute by the Scottish Government so creditors can’t suddenly change their minds and it’s not classed as formal insolvency but a voluntary arrangement with your creditors.

So, if you are having issues with problem debt, don’t bury your head in the sand or hope that it will go away. Seek some advice. Either contact mlm solutions, for a free debt options review, where a continuing money adviser will be able to advise you on the most suitable course of action for your circumstances or, speak to your local Citizens Advice Bureau, Step Change or other free sector debt advice organisation.

Problem debt, in a bind, we’ll help you find some peace of mind!


Report Reveals Fall in Scottish Corporate Insolvency Numbers

There has been a fall of 3.8% in the number of corporate insolvencies in Scotland in the third quarter of 2017/18, according to the latest figures from Scotland’s Accountant in Bankruptcy (AiB).

The figures show that total corporate insolvencies dropped from 210 to 202 compared to the same quarter a year ago. The figure for Q3 of 2017-18 is made up of 124 compulsory liquidations and 78 creditor voluntary liquidations. No receiverships were recorded for the fifth quarter in succession. There were also 129 members' voluntary liquidations, which is down from the 152 recorded in the same quarter for 2016-17.

The insolvency and restructuring trade body R3 has commented on the latest figures.

“In all, over 2017, the AiB recorded 15% fewer liquidations compared with 2016 (782 in 2017 against 920 in 2016),” said Tim Cooper, Chair of R3 in Scotland. “While 2017 may not go down as a banner year for the Scottish business community, the decrease in liquidations gives some reassurance that the economy is still ticking over. The AiB does not record business rescues – that is, administrations or Company Voluntary Arrangements – so this is an incomplete picture. It’s important to remember that insolvency isn’t necessarily the end of the road, and plenty of businesses entering an insolvency procedure will be rescued.”

“You could forgive Scottish firms – along with their peers across the UK – from feeling that the corporate landscape is getting trickier to negotiate,” he added. “Companies looking to put themselves on a firm footing for 2018 and beyond should consider speaking to a licensed and professional business advisor, making sure to check their credentials.”

Contact our Specialist Insolvency Advisers

At MLM Solutions we understand that facing up to financial challenges can be extremely difficult and stressful. However, you should be reassured to know that there are options available and, with the right advice and support, you can take the necessary steps to improve your situation. Contact us today to find out more about how we can help you.