Tougher penalties for directors who dodge debts.
Following Royal Assent of Finance Bill 2019/20, the government has announced that directors and other persons involved in tax avoidance, evasion or phoenixism (a minority of directors who deliberately dodge debts by dissolving companies then starting up a near identical business, with a new name) will be jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency.
Directors who dissolve companies to avoid paying workers or pensions could face hefty fines or be disqualified from running a business for the first time.
The government is also to press ahead with new plans to safeguard workers, pensions and small suppliers when a company goes bust:
- directors who have dissolved companies to avoid paying workers or pensions could be disqualified or fined by authorities for the first time
- struggling companies to be given more time to rescue the business and help safeguard jobs
- boardrooms to explain to shareholders how they can afford to pay dividends alongside capital investment, workers’ rewards and pension schemes.
Under the shake-up, directors may face investigation if they try to escape paying a dissolved company’s debts to their own staff and creditors. The Insolvency Service will be able to fine directors or even have them disqualified.
Business Minister Kelly Tolhurst said: ‘The UK is a great place to do business with some of the highest standards of corporate governance. While the vast majority of UK companies are run responsibly, some recent large-scale business failures have shown that a minority of directors are recklessly profiting from dissolved companies. This can’t continue.
‘That is why we are upgrading our corporate governance to give new powers to authorities to investigate and hold responsible directors who attempt to shy away from their responsibilities, help protect workers and small suppliers and ensure the UK remains a great place to work, invest and do business.’
These measures are being put forward as part of the government’s response to the corporate governance and insolvency consultation, launched in March this year.
Article from ACCA In Practice