The business was two Chinese takeaways, which traded in different locations in Portsmouth. One was owned by the director personally, while for the other premises, a lease had been agreed with a landlord.

In both instances, the company occupied the premises informally, paying rent and making contributions towards outgoings when they had sufficient cash flow.

The director had personal problems, however, and had been going through a difficult divorce. The court had ordered he must transfer the entire interest in one of the restaurants to his former wife, as part of the final settlement.

Under Pressure

Because of this, the director was under extreme stress and finding it difficult to work, so he took some time off away from the business. When the director was not present, the company was overseen by a number of temporary employees. When the director eventually returned to work, he found there were a number of anomalies in the monies taken for food and it seemed that these employees had been dishonest.

Despite the reduced earnings, the company was then served with a Notice of Inspection from HMRC, since it was believed the business had not registered for VAT and was not set up for PAYE.

Accounting Failure

The director was not aware of this but sought to put matters right, believing that the accountant had failed to manage the necessary procedures. It seemed that this was the fault of the director’s former wife, who had not kept on top of obligations and had failed to properly instruct the accountants.

The director began to try and put the relevant documents together, but he ran out of time and HMRC issued a legal request for information.

The director was unable to produce the information as required and beyond this, had no reserves that could cover the liabilities and likely penalties. He took guidance from Company Debt and it was decided to place the business into creditors’ voluntary liquidation.