Friday, 4 April 2014

The Companies House 'omni-shambles'

By Amanda Vigar, Managing Partner, V&A Bell Brown LLP

At a time when small and medium sized businesses (SMEs) are still struggling to make ends meet, I could not believe my ears when I learned that Companies House and HMRC are complicit in allowing debt-ridden companies to avoid their creditors.

Companies House are automatically striking off companies that haven’t filed their accounts or annual returns despite objections from creditors. In the past this was swayed by objections from HMRC - who are often amongst those creditors - but they no longer seem to be objecting if the amounts owed to them are small.

Quite rightly, Companies House is asking creditors to show that they have a valid debt and that it has been chased, but there comes a point when it’s not economically viable for small businesses to carry on pouring good money after bad! It doesn't mean that the debt is any less valid! Their only hope then is that someone else stumps up the money to take the company through proper insolvency proceedings. But alas, Companies House doesn't see it that way and actively strike companies off for pure administrative non-compliance.

Whilst I normally have sympathy with HMRC, in these situations, it’s often HMRC that gets hit hardest. HMRC loses the tax/VAT/PAYE from the business that has gone bust AND the creditors get a bad debt write off claim too - so HRMC loses out twice over! So why aren’t they objecting to Companies House and stopping them from allowing the offending Directors to walk away from their responsibilities, often scot free?

SMEs are the life-blood of our nation’s economy, after all, and it serves no one any good at all to be forced under - except the real tax evaders, that is!

Too often Directors stick their heads in the sand and hope things will go away whilst taking others down with them. The Government needs to insist that to get rid of a company either the Directors have to confirm that the company has satisfied all its creditors or that a proper insolvency process is gone through. Small businesses don’t have the financial or time resources to do this for themselves, so for once the Government needs to stop treating them as unpaid tax collectors and policemen and help them to get paid for the work they’ve done in good faith.