Consulting on Collective Redundancies in Insolvency Situations

Insolvency and restructuring trade body R3 has welcomed the news that the Government intends to produce new guidance for consulting on collective redundancies in insolvency situations. 

Following a number of high-profile insolvency cases where employees were made redundant without the full statutory consultation period, the Government has been looking at reforms that could be made to redundancy consultations.

R3 has long called for reform so that inevitable clashes between insolvency and employment law can be resolved. It says that the Government’s proposed guidance could help get a better deal for employees, employers, insolvency practitioners, and the taxpayer.

“Collective redundancy consultations are required by statute but the special nature of insolvencies, and the speed with which they happen, often result in an inability to undertake the full consultation process,” explained Caroline Sumner, R3’s technical director. “A full consultation requires an alternative to redundancy which often isn’t there when a company has failed.”

“The cost of keeping staff on and running the consultation means less money can get back to creditors, but maximising creditor returns is one of the primary goals of an insolvency procedure,” she said. “Not making staff redundant quickly could prevent them from accessing benefits or applying for new roles, trapping them in a situation where they’re not being paid by their insolvent employer.”

“While the Government says it will consider regulation in future, we should see how the guidance works first,” she added. “Insolvency practitioners find themselves in an impossible position when caught between employment law and the realities of an insolvency, so additional regulation would have led to punishment for practitioners trying to do their jobs with few alternatives.”

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Committees Publish Final Report into Carillion Collapse

The final report by the Work and Pensions and BEIS Committees into the collapse of Carillion has been highly critical of both the company’s board and the Big Four auditing firms. 

It has called on Government to carry out an “ambitious and wide-ranging set of reforms” to “reset our systems of corporate accountability”.

"Carillion’s collapse was a disaster for all those who lost their jobs and the small businesses, contractors and suppliers left fighting for survival,” commented Rachel Reeves MP, Chair of the BEIS Committee. “The company’s delusional directors drove Carillion off a cliff and then tried to blame everyone but themselves. Their colossal failure as managers meant they effectively pressed the self-destruct button on the company.”

"However, the auditors should also be in the dock for this catastrophic crash,” she added. “They are guilty of failing to tackle the crisis at Carillion, failing to insist the company paint a true picture of its crippling financial problems. The sorry saga of Carillion is further evidence that the Big Four accountancy firms are prioritising their own profits ahead of good governance at the companies they are supposed to be putting under the microscope."

The report notes that successive Governments have nurtured a business environment and pursued a model of service delivery which made a collapse like Carillion’s almost inevitable, and claims measures that Government has taken to improve the business environment, such as the Prompt Payment Code, have proved wholly ineffective and need revisiting.

It has also highlighted that when Special Managers are required for an insolvency, the companies must not be given a blank cheque. The Insolvency Service should set and regularly review spending and performance criteria and provide full transparency on costs incurred and expected future expense.

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Contains Parliamentary information licensed under the Open Parliament Licence v3.0.

Latest Figures Reveal Rise in Scottish Corporate Insolvencies

The latest statistics from Scotland’s Accountant in Bankruptcy (AiB) have revealed that corporate insolvencies increased from 846 in 2016-17 to 886 in 2017-18.

On a quarterly basis, the number of Scottish registered companies becoming insolvent or entering receivership increased in the fourth quarter of 2017-18, with 259 companies becoming insolvent compared with 155 in 2016-17 Q4. There were 119 members’ voluntary liquidations (solvent liquidations), the same as in 2016-17 Q4.

Commenting on the figures, Tim Cooper, Chair of R3 in Scotland, the insolvency and restructuring trade body, said:

“In many respects, this rise is not too surprising. Insolvencies of well-known companies have featured regularly on the newspaper front pages since the start of 2018, with further reports of firms scrambling to renegotiate rents and contracts with suppliers and landlords.

“Many companies are facing a complex trading environment. Staff costs are rising; there are concerns about the availability of staff after the UK leaves the EU next year; new technologies promise a productivity boost, but investing in as-yet unproven assets and software can be risky. There is also the prospect of at least one interest rate rise later this year.

“Any company director who is unsure as to the best way forward should consider taking advice from a professional source, whether or not their business is currently struggling, as the rate of change in the economic environment shows no sign of slowing down.”

Corporate Insolvency Advice in Glasgow, London, Essex & Edinburgh

We understand that facing up to financial challenges can be an extremely difficult and stressful time. However, you should be reassured to know that there are options available and, with the right advice and support, you can take the necessary steps to improve your situation. For further information on our services then contact us today at an office near you.

Business Financial Distress UK

Inquiry to Examine HMRC’s Approach to Tax Disputes

The UK Parliament’s Treasury Sub-Committee has launched an inquiry into HMRC’s approach to tax enquiries and tax disputes.

It highlights that in its code of governance for resolving tax disputes, HMRC outlines internal governance processes that are intended to ensure that it deals with all tax disputes fairly and in an even-handed manner.

The Sub-Committee’s inquiry aims to establish whether HMRC meets these standards in the way it conducts tax enquiries, resolves tax disputes and determines the amount of tax to be paid.

In particular, the Sub-Committee is seeking views on:

  • How do HMRC governance and settlement processes affect its ability to resolve tax disputes in a proportionate and fair way?
  • Does HMRC’s litigation and settlement strategy provide a rational and sound framework for resolving tax disputes?
  • Do HMRC’s collection and management powers set out in the Commissioners for Revenue and Customs Act 2005 provide HMRC with sufficient flexibility to achieve cost-effective and fair results?
  • Does HMRC’s approach to enforcing compliance with tax law, including its approach to penalties and other sanctions, result in disproportionate or unjust outcomes? If so, how can the situation be remedied?
  • Is there sufficient governance over the whole of HMRC’s enquiry process to ensure that HMRC’s interventions are well-targeted and that taxpayers are treated fairly and professionally throughout?
  • Do HMRC’s governance processes provide sufficient scrutiny and assurance for clearances and approvals given to taxpayers outside the formal enquiry process.

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HMRC Wins Tax Avoidance Case

HMRC has recently announced its success in a tax avoidance case worth £55 million that involved businesses issuing loan notes as bonuses to avoid tax.

According to HMRC, its legal victory over Cyclops Electronics and Graceland Fixing proved that a multi-million pound tax avoidance scheme used by over a hundred other businesses was a ruse to avoid paying tax.

The businesses used loan notes to pay company directors’ bonuses in an attempt to get around paying tax and National Insurance on their awards.

Specially created companies issued loan notes in £10 denominations that matched the bonus amount exactly. Special conditions were included to avoid the tax and National Insurance due when the loan notes were given to the director.

HMRC says the scheme was designed to take advantage of legislation that provides tax relief for genuine commercial transactions. This legislation has now apparently been amended to prevent similar situations arising in the future.

“We cannot allow tax avoidance schemes like these to deprive the UK of vital revenue,” said Penny Ciniewicz, HMRC’s Director General for the Customer Compliance Group. “The money we’ve protected in this case alone would be enough to pay the annual salaries of around 2,400 newly qualified teachers.”

HMRC says that it has won nine out of ten tax avoidance cases taken to court in the last two years, with many more settling before reaching that stage.

HMRC Tax Demand Advice Glasgow Edinburgh & London

We understand that facing up to financial challenges can be extremely difficult and stressful. However, you should be reassured to know that there are options available and, with the right advice and support, you can take the necessary steps to improve your situation. For further information on Alleged Tax Avoidance and Accelerated Payment Notices, please contact us at an office near you.

HMRC’s decision on the Eclipse partnerships

Following a review of their position in respect of the tax liabilities that apply in relation to the Eclipse tax avoidance scheme and having discussed the matter with a number of experts both internally and externally, HMRC have reached their decision in relation to how much tax partners in the scheme will have to pay.

As you may be aware HMRC challenged Eclipse Film Partners No.35 LLP on the basis that the partnership was not trading (despite claiming that it was) and therefore partners were not entitled to set off interest relief against their other income.  The First-tier Tribunal, the Upper Tribunal and the Court of Appeal confirmed this was the case.  In April 2016 the Supreme Court refused to hear the partnership’s appeal and therefore the decision became final.  During 2017, as a result of this decision, investors received Follower Notices and Accelerated Payment Notices, but these only requested that tax returns were corrected to remove interest relief set against other income, not against the partnership income.

HMRC have now reached the view that none of the interest relief claimed against partnership profits or other income is allowable, but the partnership profit share is still taxable.  HMRC are now in the process of finalising their liability calculation and will be writing to all partners in due course.

This could significantly increase the amount of liability owed by each partner.  Until the letters are received we have no way of knowing the difference this liability calculation will make.  However, based on a bankruptcy case where the APN value was in the region of £345,000 and the final proof of claim (including penalties, interest and Class 2 liability) from HMRC totalled in excess of £750,000…..I feel this calculation may push a number of partners in Eclipse from “wanting to pay” to “can’t pay”.

HMRC set up the Counter Avoidance Team in 2015 and the team now consists of over 45 trained Accountants, Tax Inspectors and professionals with both Insolvency and Legal backgrounds.  The team is litigating increased numbers of schemes each year and has collected in excess of £3 billion from users of tax avoidance schemes.

As per my previous blog there is still no doubt that public tolerance of tax avoidance is an historic low and for investors/partners in these schemes, it is a problem that is not going away.


At mlm we understand that facing up to financial challenges, such as tax issues can be very stressful.  We also understand that you may unwittingly find yourself on the wrong side of HMRC as a result of inadequately explained investment advice.  You should be reassured to know that there are options available and, with the right advice and support, you can take the necessary steps to resolve your situation.

Should you have received a demand from HMRC in relation to tax matters, please do not hesitate to contact me directly on 0141 228 1329, email: or alternatively complete our online enquiry form.

Rise in UK Insolvencies Forecasted

A new report has forecast that insolvencies are to decrease globally by -1% in 2018, although the number of bankruptcies will remain higher than in 2007.

According to the Global Insolvencies Index by Euler Hermes, the UK will be one of the countries to experience an increase in insolvencies, with numbers forecast to increase by 8% in 2018.

It says that as Brexit approaches, importers and consumers have been affected by raising input costs and a weaker pound. The report highlights that the UK is an exception in Western Europe, where most countries should experience either a decrease or stabilisation in the number of insolvencies thanks to the economic recovery and supportive monetary conditions.

The Index also points out that despite the rebound in growth and trade globally, more and more domestic sectors are exposed to large business failures. In 2017, large insolvencies increased by +21% with notable increases in services, retail, agrifood and construction. According to Euler Hermes, competition and digital disruption help explain this trend and subsequent risks for suppliers.

“All in all, insolvencies are stabilising worldwide after seven years of decreases,” said Ludovic Subran, Chief economist at Euler Hermes. “This confirms the return of credit risk with the economic recovery. In 2018, companies in Asia, Latin America, Eastern Europe and the UK should be closely monitored. In addition, large bankruptcies are increasing fast as disruption in industries such as services and retail leaves no one unscathed. Mind the domino effect!”

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Assistant Manager at mlm Solutions Achieves Insolvency Exam Success

We are pleased to announce that Barry Mochan, Assistant Manager at mlm Solutions, has recently passed the Joint Insolvency Examination Board exams and is on course to become a fully qualified personal insolvency practitioner with our firm.

All of us here at mlm Solutions are delighted by Barry’s success and we look forward to welcoming him as an appointment taking member of the IP team in the near future.

Concerns over Financial Audits of Charities

The Charity Commission has raised concerns over perceived failures by auditors to alert the charity regulator to matters of material significance identified in charity audit reports.

According to a recent review conducted by the regulator, of the 114 auditors who gave audit opinions containing information they were required to report to the regulator in the six months to October 2017, only 28 contacted the Commission.

The Commission says it is now working with the accountancy profession to raise auditors’ awareness of requirements and address this under-reporting, which it describes as raising a ‘significant concern’ about the adequacy of reporting to the Commission by auditors.

The regulator undertook the review to test compliance with rules that came into force from May 2017, extending the list of reportable matters to include modified audit opinions, such as paragraphs about an emphasis of matter or a material uncertainty regarding going concern – meaning there are doubts as to the charity’s ability to remain solvent.

The new rules are designed to help the regulator intervene in a more timely way, notably where charities face financial difficulty putting their future at risk. They follow the Public Administration and Constitutional Affairs Select Committee’s inquiry into the collapse of Kids Company, which recommended clearer guidance to auditors on the issues regulators expected them to report.

Of the 28 auditors who made a required report to the Commission, only six did so promptly, or within one day of signing the audit opinion; three waited more than two months to alert the Commission.

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Meat Supply Company Enters Administration

A company that supplies meat to a variety of businesses, including hospitality, catering, schools and care homes, has gone into administration following an investigation by the Food Standards Agency (FSA).

The FSA investigation meant Russell Hume had to recall its meat products and many customers subsequently stopped using them as a supplier.

According to the BBC, the directors of the company said that the actions of the FSA had "created impossible trading conditions for us" and that it had no choice but to go into administration.

The administrators of the company, which has production bases in Fife, Liverpool, Birmingham, London, Boroughbridge and Exeter, have had to make 266 members of staff redundant. They are also currently seeking potential buyers for the business and its assets.

A statement on the FSA website said that:

“There is no indication that people have become ill from eating meat supplied by Russell Hume. However, we are concerned about the poor practices in place at their premises so that is why we have taken proportionate action to ensure no meat can leave their sites at present. We are continuing to assess the situation.”

However, the firm’s directors said that while they would cooperate with the FSA investigation, they felt that "its action has been out of all proportion to the concerns it says it has identified”, reports the BBC.

Administration provides the company protection from action taken against it by creditors and offers breathing space to consider a rescue plan. The administrators take over the management of the company and are responsible for realising assets on behalf of all creditors.

Administration Advice & Debt Recovery Glasgow, Edinburgh, London

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