Our client approached us looking to solve a huge problem with tax. The company had lost its main customer. Sales fell from £300,000 to under £125,000. Gavin R had laid off the staff and walked away from the informal office lease. It was now being run from his flat in central London.
So far so good, saving costs and cutting overheads was a good plan. He had taken the right steps to turn the company around.
But there is always a "legacy debt" or ball and chain following along when a company sees sales fall fast. Some £40,000 of VAT, corporation tax and PAYE liabilities were simply unsustainable for a company now nearly two thirds smaller than when the debts were incurred. Cashflow was poor, despite factoring in place with a big bank provider.
The (main UK bank) factor didn't understand why sales had fallen and they REDUCED the factoring facility advance, this hit cashflow again! Really helpful that.
Second main issue was a director's overdrawn current account - he had been drawing cash out monthly to live, this was not going through the PAYE scheme and at the end of each year his accountant would fix this by the voting of a dividend from retained profits. Well that's a good plan (or was before RTI was introduced in 2013) if profits are being made. The company had LOST money for 3 years, so no dividends were payable. This resulted in an overdrawn directors account of £211,000. He had no money to pay this back in say a CVA.
So our advice was sell the assets such as they were, work in progress and equipment to a new company. We arranged for a professional valuation, wrote the contracts for sale, advised him on the process. We also provided legal advice on the insolvency, set out board resolutions and guided the director through this difficult time.
Cheswick also arranged for a new small factoring facility for his new company, with a specialist provider who understood the previous insolvency issues. So newco is trading and being funded by factoring, the newco company is paying for the work in progress - back to oldco - as it completes new work.
Does your company face large tax bills, looming overdrawn directors' current or loan accounts? Do you need to sell or restart the business quickly, but don't want or cannot afford pre-pack administration? Call us now for a fast solution. 020 74166677.
As this case shows, we can help small companies and companies of any size fix their problems...
Our fees for the above rapid professional solution? Under £3,000.
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