Underpaid tax to blame for director disqualifications

Underpaid tax has been cited as the most common reason for the
disqualification of company directors, according to research by City law firm
Wedlake Bell.

Other factors include the failure to keep correct accounting records, theft
and fraud, and continuing to trade while the company is insolvent.

The research also revealed a 31% jump in company director disqualification
proceedings launched over the past year.

Disqualification proceedings were launched against the directors of 1079
companies in 2008/09, up from 820 in 2007/08.

The firm said that directors are most often pursued for underpaying tax to
HMRC, with the directors of 403 companies – or 37% of all cases launched in

Edward Starling of Wedlake Bell said the figures show that despite HMRC
advocating greater leniency towards businesses facing cash flow problems, the
Insolvency Service is becoming more aggressive.

‘Many directors will choose to pay suppliers first as they consider this more
important for the immediate survival of their business. However, they must not
forget that failing to pay HMRC while continuing trading could eventually land
them into trouble personally,’ he said.

Further Reading:

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