Company Secretaries - resign immediately

It is not widely recognised that should there be an error on PAYE returns, Company Secretaries could be held personally accountable and fined as required by HMRC. 

When the need for a Company Secretary was abolished on 6 April 2008, little action was initially taken by most professionals in terminating their appointment (although, more recently new limited companies are not appointing a Company Secretary neither are they replacing this role when people resign or retire). Nonetheless, there are still a significant number that assume their role carries little weight of fiduciary duties as it is assumed this rests with the director(s). 

Darren Wilson of DKF Insolvency said

“After reading the Compliance Check Series issued by HMRC I wouldn’t be surprised to see many company secretaries resign immediately to avoid being held accountable should something unforeseen happen in the future, or sooner if the company is already struggling financially.

See page 5, 2nd heading titled “When directors and/or the company secretary may have to pay a company’s penalty for deliberate failure to notify” - this section states that;

“One or more of the directors and/or the Company Secretary may have to pay some or the entire company penalty if:

  • The penalty is attributable to them, and either

  • They have gained personally from a deliberate failure, or

  • The company is, or we believe it is about to become insolvent, even if they did not gain personally from the deliberate failure.

If the company pays the penalty, we will not ask the directors or the Company Secretary to pay it.”

If you or any third party client still remains in office as Company Secretary, unless you are already directors of the company, you may wish to reconsider this position” says Darren.

See link HMRC link below

www.hmrc.gov.uk/compliance/cc-fs11.pdf

If you have any queries on the above please do not hesitate to contact us today.

RECENT HMRC CASE STUDY

This article may have come as an unpleasant surprise to many Company Secretaries.  Below is the synopsis of a situation where our professional advice was bought in to assist.

A security company where personnel were used on a very ad-hoc basis as and when needed - the directors (incorrectly per HMRC) requested all personnel to sign up agreeing to account for their own tax and national insurance.  It should be noted here some of the personnel had full time jobs elsewhere and/or also worked for more than one Security Company, including the one in question.

HMRC had looked into the affairs of the company and advised the company of its wrong doing.  With a large tax bill looming, the directors took the steps to appoint DKF who advised to cease trading immediately and thus place the company into liquidation.  Some months after the date of liquidation letters were sent to the Company Secretary and the directors requesting the sums owed through the PAYE error with the above staff to be repaid.  This demand was thus clearly triggered by the above, even though the directors thought they were acting under their fiduciary duties as the company had little prospect of paying the large tax bill, which was to crystallise now following the HMRC visit.  This has been strongly defended so far by the Company Secretary and the directors and, to date, no further action has been taken by HMRC since May 2014. 

 

If you have any queries on the above please do not hesitate to contact us today.