Case Studies for

We were approached by an accountant who has been working with us now for over 10 years to assist a client of theirs who owns a small garage. The company was under threat from HMRC due to accrued tax debts and they were threatening the distrain over the company’s assets.

The client wanted to keep the business going but had been hit badly by the pandemic and rise in costs. The business appeared viable, but needed to deal with its historic debts. Liquidation was recommended and by way of a management buyout, the directors were able to keep trading under a new entity.

The accountant was able to assist the directors in finalising their tax returns for the old company and in setting up a new company to trade forward. Moving forward they are retained by the client under their new company to help keep costs in check and provide accounting services moving forward.

We were approached by the accountant of a construction consulting company in financial difficulty. The business was highly geared with HMRC debts and a number of loans which were also subject to personal guarantees. 

Many Insolvency practices may just say liquidate and leave the director to deal with the PGs, but we suggested a more innovative approach combining a Company Voluntary Arrangement for the Company with an Individual Voluntary Arrangement for the director. The appeal of this for creditors is much stronger as it allows a much higher return to personal guarantee creditors with a return from both the IVA and CVA.

Initially the accountant then took an instruction to bring the accounts up to date, file all outstanding tax returns and then prepare profit and loss and cash flow statements to assist with the proposal of the arrangement. This allowed the Voluntary Arrangements to be put forward to creditors which we approved due to the collaborative approach. The arrangements are still going strong and the accountant has retained their client moving forward.

Whilst it may be tempting to suggest a director with a company that can’t pay its debts, and has an outstanding directors loan account to the company just strikes off the company or leaves it dormant, the change in legislation in late 2021 makes this no longer an option. Doing so can leave directors disqualified and with a compensation order up to the value of the company debts and costs. Even if they believe they have a case against this, it can leave them with a bill for tens of thousands in legal costs in defending themselves.

Our rule of thumb is, where the amount the director owes to the company is less than the amount the company owes to creditors, liquidation remains beneficial. In all circumstances where the company ceases trading with debt, liquidation remains beneficial unless the directors loan exceeds the debts and the director is in a financial position to repay them in full.

We were recently approached on a case such as this. The company was no longer financially viable, but the director owed money to the company. Following appointment as liquidators, the director instructed the accountant to assist them in negotiating the directors loan position. They reconciled the loan against the final salary, redundancy and expenses on the directors behalf, leaving a reduced figure they had to repay.

As liquidators our primary aim is to achieve the best possible result for creditors. By working with the accountant to establish directors loan figures to then reach a settlement with the director, we avoid the need for expensive legal action. This route keeps everything amiable and all parties understanding what is happening at each stage.

Not all directors can afford the costs of liquidation. Whilst we do offer payment terms to assist with the cost, working creatively with the accountant can work out even better for the company. When the accountant of a company with a closing cafe approached us, the company owed money to everyone but HMRC.

The company was short of funds to cover the costs of liquidation, however due to recent losses was owed Corporation Tax and VAT by HMRC. Accordingly we were able to instruct the accountant to prepare the necessary returns to cover these taxes as a part of the liquidation process.

The taxes recovered allowed the costs of the liquidation to be paid and the accountant to be paid for the additional work carried out.

One of the most important things for your clients is meeting deadlines. We were recently approached by an accountant with a client looking to place the company into members voluntary liquidation and claim Business Asset Disposal Relief. The key point was that the end of the tax year was approaching and the client needed the distribution of the funds to be made before that deadline.

For efficiency the accountant took an instruction to prepare the necessary declaration of solvency to allow the MVL to proceed. We were then able to use the short notice procedure to quickly place the company into MVL. Normally a distribution cannot take place until creditors have had an opportunity to claim, however we arranged for the distribution to be made on an indemnity basis, completing it before the end of the tax year and allowing the accountant to then make the relief claim in the clients self assessment return.

We don’t just work with accountants. At Business Rescue Expert, we also work on the advisory panel for Cooperatives UK. Cooperatives UK have an interest in a large number of cooperatives within the country. We recently assisted a cooperative specialising in training programmes for women to turn round its fortunes.

We were instructed to carry out a detailed business review and provide advice on going concern and insolvency options. With the advice provided we were able to provide options for the business to continue as a going concern and it is still trading solvently today.