Jameson Smith & Co Ltd

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Thursday, 13 February 2014

HMRC Time To Pay Arrangements

I have heard through the grapevine that HMRC are looking closely at withdrawing support for the Time To Pay arrangements from this April and these arrangements have been so popular in the past with SMEs in clearing company debt; too popular, perhaps. Some may be surprised to hear me say, but I believe generally that HMRC do a good job in very difficult circumstances.

HMRC have had to endure IT system changes which have not always been as successful as they should have been. Cut-backs in staffing numbers reduction in pension benefits as have all civil servants along with chopping and changing of what jobs are completed where. The communication systems were antiquated though they are trying to catch up and some at the higher levels finally have access to external email. There is an awful lot of confusion inside and outside regarding the new phone systems which frankly leave a lot to be desired as there is only so many times you can hear Vivaldi or Green Sleeves before you start banging your head on the desk in tune with the beat.

Attempted humour aside, any cut-back on the SMEs ability to agree a time to pay arrangement would be a severe set-back to those companies who genuinely need help when coming out of recession. We deal with company debt and HMRC negotiations as part of our work and the time to pay arrangement has been a valuable tool and saved some companies - no question.

Coming out of a recession is bad enough but coming out of the longest recession in recorded history is another. I am hoping that Carney keeps the interest rates down as businesses need as much help as is possible. Okay, I know there will be some out there saying “Well I pay my taxes on time so why shouldn’t they?” I accept the point, but I do come across a large percentage of smaller businesses who have cut to the bone to survive. Once a company does this they are very vulnerable and it is easy to get into difficulty for no other reason than a larger business debtor has decided to pay later than agreed. You can argue these companies should not have placed all their eggs in one basket, but the reality is these smaller businesses represent a significant part of the British economy.

I appreciate these HMRC time to pay arrangements are time consuming and so I assume they are costly to manage and monitor, but what is the alternative to a time to pay arrangement? 

Written by: Mike Smith

Wednesday, 12 February 2014

Winding Up Petitions

When you are helping companies with debt, inevitably, not a week goes past without someone calling saying their company is being threatened with a winding up petition at the High Court for an unpaid invoice. Equally, we are often contacted by directors whose company is owed money and they simply cannot get paid for one reason or another. Again, the winding up question is raised “can I wind the company up if he doesn’t pay?”.

In a surprising number of cases inexperienced lawyers will instigate the winding up action against a company knowing it will bring maximum pressure to bear but are often taking a big gamble. A winding up petition is the forced and compulsory liquidation of a company when the company can no longer pay its debts or chooses not to. We have had several cases recently where directors have been in despair as they have clearly contested debts with creditors yet have still progressed to the High Court. In all the cases there was no legal proof that the debt was ‘real’ in as much as no statutory demand had been presented, or previous court action had proven the debt in law. 

Dealing with Business Debt
One case in particular was all the more odd as the creditor and the debtor were still trading with each other quite happily whilst the lawyer was pursuing the winding up petition. In this particular case the amount of debt was genuinely unknown by either party directly because they were still trading together? Bizarrely the lawyer refused to discuss the matter and is pressing ahead with the winding up petition despite the potential hazard. In principle, the winding up petition is not a debt recovery process, nor a dispute resolution process, it is a process to close a company. Judges do not take kindly to abuse of the system and not following due process. In all likelihood, the judge will make the petitioner bear the court costs for hearing the case (not cheap) and no doubt get a flea in the ear.

The message is a clear one – if you are owed money then always prove the debt beforehand, either by the use of a statutory demand or a CCJ, for example. This proves that the debt is uncontested and you can pursue the winding up petition safely in the knowledge you have followed due processes. 

Written by: Mike Smith

Wednesday, 5 February 2014

The sun has got his hat on

I remember the story told by Eric Clapton about George Harrison when he wrote 'Here Comes the Sun' in George’s garden.  Eric said something along the lines of “it was really bad and dull weather and the sun just appeared out of nowhere and me and George sat down for a cup of tea and he (George) started playing his guitar which he always had lying around and he was immediately uplifted by the sun”.  For those of you who don’t know, George played with the Beatles and the Album was the famous one with Paul walking across the street bare footed proving without doubt he was in fact dead.

Anyway I was reminded of the story when the sun appeared from out of nowhere on a very, very bleak grey and wet Monday morning. Just a few minutes of the glorious bright golden sunshine peering through the clouds immediately lifted my spirit and provided a spectacular contrast to the dull battleship grey surroundings. It also reminded me that no matter how bad things get or how depressing life may be that there is always something positive happening somewhere - you just have to look for it. Granted this is not always that easy to find in the newspaper, or on the news but it is there, nevertheless. It is a truism that the sun is always shining somewhere. The sun may be hidden by the clouds and it may be raining but the sun is always shining – you may not see it but it is there. I find this somehow uplifting and very positive to know. It may seem obvious to some but I would bet the majority forget this and it’s easy to see why when we have so much depressingly monotonous weather, to say it has been wet would be an understatement.

I did see some good news in the news recently which was that there is new kind of chocolate being developed that is both healthy for us and tastes great. Made from raw chocolate beans and any purchase also helps to sustain the rain forest the birth place of the chocolate bean, so sounds like a win, win, win to me. You can learn more about this story at www.forevercacao.co.uk.

Spring is almost upon us so I am determined to remain positive and see the sun no matter if it is hidden by a lot of clouds. This thought process can be applied as a metaphor for any business situation as well. No matter if the times appear desperate and tough at the present moment, there is always something positive to be taken from every situation and sometimes all you need to do is focus on it for long enough to be able to change the situation for the better.

Monday, 3 February 2014

Directors' Protection & Education in Today's Business Environment

In July this year I will have been advising businesses of all sizes for thirty five years and I have encountered just about every kind of business challenge. One consistent theme that the smaller businesses owners suffer is the lack of protection they have when things go wrong.

There are even those that believe directors obviously set the business up as a limited company and clearly plan to avoid paying creditors from the outset. The common perception of closing a company for example is often that the creditors will likely lose out and the directors responsible should not be allowed to trade again. My experience is that the very people who make these statements change their view when it is their own company that suffers an unexpected event causing insolvency.

The vast majority of directors seeking debt help when becoming insolvent are decent, hard working individuals who are inevitably faced with extremely difficult decisions. These decisions are often made without support or knowledge of an insolvent liquidation; why would they?

Despite what some may think, directors often have consequences from liquidating their limited company and deserve better protection and advice. The Citizens Advice Bureau is under attack from financial cuts and does not provide advice to businesses owners, in any event.       

Often the financial agreements signed in haste are not covered under the Consumer Protection Act and the directors are left to fend for themselves. The banks, a once trusted institution with local roots, have become anonymous institutions who wantonly abuse business owners at their discretion.

The Government’s Business Bank due to launch in the third quarter this year (2014) is a great idea and I wish it well. I hope it treats its customers fairly. The need for director protection however goes beyond the banks and impacts on most financial agreements.

Directors are believed to be ‘informed individuals’ and ‘sophisticated investors’, but I’m afraid this is simply not the case. Okay, there may be legislative issues surrounding the fact that a limited company is a legal entity within its own right and so, is not an individual consumer per se’; but something needs to be done to improve directors' protection and education surrounding the potential pit-falls of insolvency and other risk-laden areas of running a business.

I am not a lawyer but why can’t the Consumer Protection Act be amended to include directors of a company under a certain size? I am hopeful that something will change following on from Lawrence Thomlinson’s report.

Written by: Mike Smith