Payroll service provider director banned for £5m VAT failings

The director of a company which collapsed with debts of over £43m owing to HMRC has been disqualified for 11 years, after an Insolvency Service investigation found he breached his position of trust by knowingly instructing the submission of a VAT return which was under-declared by £5m

David Allen, who is based in Dubai, was the sole director of Work Legal-E Ltd, which went into Creditors Voluntary Liquidation in July 2013. The payroll service provider, which operated from premises in Edinburgh, was initially found to have a deficiency to creditors of £26.4m, which subsequently increased to £43.4m.

The Insolvency Service investigation found that in on 2 June 2011 the company accountant notified the company and Allen that the VAT liability for Q4 2011, covering the period February 2011 to 30 April 2011, was £8,417,468.

However, on 8 June 2011 the company submitted an online VAT return for the quarter disclosing a liability of £3,417,648. On the same day the company settled the declared liability for the lower amount.

During a meeting with HMRC in April 2013, Allen said he had opted to under-declare the liability as he considered the company was ‘tight on money’.

A Insolvency Service review of the company’s bank statements disclosed the company had sufficient funds to meet payment of the true liability Q 4 2011 owed for quarter 04/11 during the period 9 June 2011 and 11 October 2011, and sporadically during October and November 2011.

Between 13 June 2011 and 19 August 2011 Allen received three payments from the company totalling £1.65m, with the Insolvency Service claiming there is no contractual evidence to support his entitlement to the payments made.

Robert Clarke, group leader - insolvent investigations North, said: ‘Directors who put their own personal financial interests above those of customers and creditors damage confidence in doing business and are corrosive to the health of the local economy.

‘This ban should serve as a warning to other directors tempted to help themselves first; you have a duty to your creditors and if you neglect this duty you could be investigated by the Insolvency Service and removed from the business environment.’

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Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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