Note to Directors – Creditors come first!

A director has recently been disqualified (by Undertaking rather than Order) for a “top bracket” 11 years following allegations by the Insolvency Service that he had breached his position of trust by knowingly instructing the submission of a VAT return which was under-declared by £5 million.

The director in question, despite being notified by the company’s accountant of the company’s quarterly VAT liability of £8,417,468, submitted (and paid) an online VAT Return of only £3,417,648. Meanwhile, the director received 3 payments from the company totalling £1,650,000 for which he was unable to produce sufficient contractual documentation to justify.

During a meeting with HMRC, the director later advised that he had opted to under-declare the liability as he considered the company was “tight on money”, though this was disproved by a subsequent review of the company’s bank statements.

Whilst the figures are in themselves not insubstantial, the director in question’s disqualification has been pushed up into the “top bracket” (being 10-15 years) as a result of (a) the dishonesty allegation of his knowing under-declaration of VAT; and (b) his conduct in placing his own financial interests above those of the company’s creditors. Both allegations involve abuse of the director’s position of responsibility and accordingly push the appropriate disqualification period from a “middle” to “top bracket” disqualification.

For further details on this case or for advice on Director Disqualification matters generally, please contact our head of Director Disqualification, Matthew Howat, on 020 7884 9700.

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