As we often say, HMRC can be a ‘quiet creditor’ because they don’t shout as loud or seem as urgent as other, more immediate bills. However, they are persistent and will eventually lose patience and enforce collection. The repercussions for underestimating how dedicated HMRC are to collecting monies owed to them for VAT and Corporation Tax can be life changing, as Ex-Footballer, John Barnes, recently found out. /help-home
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John Barnes Media Limited insolvency – A reminder that HMRC do not take non-payment lightlyPosted: May 7, 2024

What happened between John Barnes Media Limited and HMRC?

According to the Insolvency Service news, John Barnes Media Limited showed a turnover of over £440,000 between 2018 and 2020. However, it failed to pay any of the £190,000 owed to HMRC for corporation tax and VAT during that period. The company then went into liquidation in 2023 with HMRC as the only known creditor.

Let’s put that into perspective for a moment. During a two-year period, the company earned significant revenue. The business filed returns to HMRC that showed it owed both VAT and Corporation Tax to HMRC. Yet, it paid neither and continued to trade until 2023 before being forced into liquidation following an HMRC petition

 

Another insolvency or a bigger issue?

It is worth a little context here as to why this matter is so newsworthy. We should take into account the celebrity status of ex-England and Liverpool footballer, John Barnes, because it makes the story more viable for the newspapers. However, more importantly, there are several factors that we can either confirm or perhaps surmise from the case.

It may well be that the pandemic and other factors led to the closure of John Barnes Media. Many companies struggled during that period and, as a result, some never recovered and faced insolvency. However, there are questions raised here that seem to point to a further issue.

Director status doesn’t always protect you.

If you are a company director, then you have a series of very clear duties and responsibilities to adhere to. These extended to financial matters, and it seems the case that John Barnes Media Limited did not meet its obligations to HMRC.

A further factor in this is that, as the sole director, John Barnes would have been solely responsible for the finances and how they were being reported to HMRC. This should not be a problem if all is well, but it does make the allocation of responsibility for the way the company was managed, unquestionable if things go wrong. When the company went into liquidation and HMRC started their investigation last year, it meant that the debt owed was clearly the responsibility of one director. Additionally, since the company returns appear to have undeniably shown the amount owed, there could be no doubt about the amount of money owed.

It should however be noted that even if there had been more than one director, all directors have the same responsibility regardless of their role within the business.

In this particular case then, a clear line of sight to responsibility meant that John Barnes had, as described by Mike Smith, Chief Investigator at the Insolvency Service:

‘…a legal duty to ensure his company paid the correct amount of corporation tax and VAT. Instead, it paid no tax whatsoever between November 2018 and October 2020, despite receiving earnings of well over £400,000’

As a result, Barnes has now been banned from being a company director for three and a half years.

 

What every company director can learn from this case

Firstly, this demonstrates something that we have repeated several times in these blogs, in our help for director’s pages and our new survival guide. Don’t allow yourself to fall into the quiet credit trap and think HMRC will not come for their money. They are still creditors and so should be dealt with in the same way as others.

A further point is that being a director is not the all-encompassing shield some people consider it to be. If you are found to be negligent in your duties, then you could end up being banned as a director or worse. 

Just as a reminder of the different options HMRC have when it comes to debt.

Ignoring HMRC's demands might result in penalties and additional interest on unpaid taxes. These financial penalties can quickly accumulate, turning a manageable issue into a significant financial burden.

All of the above can be devastating for the director and often lead to personal issues, business problems, a loss of reputation and, in extreme cases, some prison time if the director is found to have acted fraudulently.

 

What to take away.

HMRC are often relentless and will pursue debt until it is no longer in their interest to do so, or they get paid. They have the power to add interest and other fines, so the amount you owe will increase, and the problem will multiply. So, what to take away from this seems very clear. 

If you cannot pay your tax obligations, or you owe money to HMRC, you need to communicate with them and make arrangements to pay as soon as possible. They are not quite the ogres they are reputed to be, and they will usually work with you towards a resolution. However, if you bury your head in the sand, ignore their demands, and just hope for the best, the chances are you will regret it.

 

If the John Barnes case has given you cause for concern around the potential insolvency of your business, check our help for directors pages where you will be able to make an initial free appointment to discuss your problem.

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