A husband and wife from Dundee who were directors of a newsagents have been disqualified for a combined 13 years for submitting false information to the tax authorities, which resulted in over £1m of lost revenue for HMRC when the business went into administration
Mohammed Arshid has been banned from acting as a company director for 11 years and his wife, Maqsoodan Arshid, for two years. They were both directors of Nethergate Newsagents Ltd which was placed into compulsory liquidation in July 2014, on the petition of HMRC with debts of £1,044,973.
The liquidation took place after a five-year investigation during which HMRC established that Mohammed Arshid caused the company to under-declare and conceal liabilities in relation to PAYE, National Insurance Contributions, VAT and corporation tax.
This included submitting false P35 end of year returns for 17 years; concealing sales in VAT returns for a period of 64 VAT quarters; submitting incorrect company tax returns over over three consecutive financial years between 30 November 2005 and 30 November 2007; and in the following six years understating the company’s sales.
By their own admission, the cash misappropriations, from the company allowed Mohammed and Maqsoodan Arshid and their family members to achieve personal gain including home improvements, private education and topping-up of employee wages.
An investigation by the Insolvency Service found Arshid had breached his fiduciary duty as a director by submitting false information to HMRC resulting in lost revenue on PAYE Tax, NIC, VAT and corporation tax totalling £1,020,423. His wife, was disqualified for abrogating her duties as a director which allowed Arshid the freedom to commit the offence, which they both personally benefitted from.
Robert Clarke, group leader - insolvent investigations north, said: ‘These bans should serve as a warning to other directors tempted to help themselves first; you have a duty to your creditors and if you neglect this duty you could be investigated by the Insolvency Service and removed from the business environment.’
An HMRC spokesperson told Accountancy: ‘We don’t comment on identifiable individuals.’
Most businesses pay their taxes, but when a business goes under, the public purse may be left with large irrecoverable tax debts. HMRC, like any other creditor, has a duty to work with insolvency practitioners to work out whether the directors acted correctly at all times.
From 6 April 2012, HMRC can require employers to pay a security where there is serious risk, based on past behaviour that they will not pay their PAYE or Class 1 NICs.
