Director disqualification for accountants’ failure over £1.4m tax due

Two ICAEW-qualified accountants from Wales have been disqualified from acting as directors after failing to pay £1.4m in tax from their payroll companies

Kenneth Munn has been disqualified for seven years and Richard Rees for four years. Both were directors of Dormco SCP Ltd; S C Personnel Ltd; Cotsen Accountants Ltd; and Cathedral Road Management Ltd.

All four companies traded in succession as payroll companies providing services to other companies also controlled by Munn and Rees. The companies went into liquidation in August 2013.

An investigation by the Insolvency Service found that Munn was responsible for Dormco SCP Ltd failing to file a corporation tax return resulting in the payment of an assessed amount of tax which was £168,520 less than the amount which he knew was due, and that Rees was found to have allowed this to happen.

Both directors also caused all four companies to fail to pay PAYE and National Insurance Contributions (NICs) amounting to £1,242,616 when due.

At the date of liquidation, the amount owed to HMRC amounted to £1,450,995 including additional interest, tax and penalties.

Sue MacLeod, chief investigator at the Insolvency Service, said: ‘These actions not only gave these companies and others controlled by the directors an unfair advantage over their competitors, but have also left the public purse seriously shortchanged.

‘If you run a business in a way that is unfairly detrimental to any of its creditors, including by failing to correctly pay tax, the Insolvency Service will seek to remove you from the business environment.’

The ICAEW said: 'Although we cannot comment on any individual matters, those same byelaws state that a member shall be liable to disciplinary action if he commits any act or default likely to bring discredit on himself, the Institute or the profession of accountancy.'

Richard Rees has been contacted for comment.

HMRC background note:

Most businesses pay their taxes, but when a business goes under, the public purse may be left with large irrecoverable tax debts. HMRC, like any other creditor, has a duty to work with insolvency practitioners to work out whether the directors acted correctly at all times.

From 6 April 2012, HMRC can require employers to pay a security where there is serious risk, based on past behaviour that they will not pay their PAYE or Class 1 NICs. 

Report by Pat Sweet

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