Background
Our clients traded as a Garden nursery with a turnover of £375,000,000 and assets of £220,000. They employed 25 staff.
Problem
Their largest Creditor was HMRC, in which they owed £630,000 in unpaid VAT and PAYE. They also had debt totalling £170,500 to their trade Creditors. They had recently received a petition from HMRC, to wind up the Company with the hearing scheduled in to be held in the next 30 days.
The debts were accrued due to the Nursey been closed for four months previous, due to asbestos being found on site.
Solution
We advised the Directors to take immediate action by reviewing their sustainability of the Company excluding the debt, as the core of the business was viable.
The Directors had made contact with HMRC to arrange and discuss the options available to them for a payment plan. However, this was declined by HMRC as they demanded all of the arrears were to be paid prior to the hearing. The circumstances with HMRC had been ongoing for 7 months.
The Directors had sought advice relating to placing the company into Voluntary Liquidation and had lost all hope in continuing to trade.
We requested that we analyse the HMRC figures to assess how the debt had arisen, for what period and to break it down into PAYE, VAT, Corporation Tax and CIS Contractors Tax.
Having reviewed the figures, there appeared to be some confusion around the VAT and PAYE figures. We discussed this with the bookkeeper and realised that a significant amount of the VAT was on invoices which had not yet been paid. The Company operated on a pro forma invoice basis and VAT would only be paid once the invoice was paid. It transpired that over £380,000 of VAT could be written off by way of cancelling invoices which were not paid.
This reduced the VAT debt by over 45%. We communicated this with HMRC and were able after protracted negotiations to a Time-to-Pay arrangement over 12 months.
Conclusion
As the Petition to wind up the Company was dismissed, the business assets and goodwill were safe and the Company continued to trade.
All jobs were saved as no redundancies were made.
Next Steps
If you want to find out anything further about this topic then please feel free to call me on 0330 236 9930, 0330 236 9938 or 07961 116321. All conversations will be in strict confidence. You can also email me vee@navigatebr.com.
This article is for information and interest only. It is not a substitute for full professional advice, which will take in to account the specific and individual circumstances. Navigate Business Recovery Limited cannot accept any responsibility for any loss arising as a result of any person or organisation acting or refraining from acting on any information.
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