Businesspeople who deliberately suppress their cash takings with a view to avoiding tax may have to pay more than just a financial price for their wrongdoing. In a case on point, a miscreant restaurateur was disqualified for eight years from acting as a company director.
The case concerned the sole director of a company that owned a restaurant which was the subject of a number of unannounced visits and test purchases by HM Revenue and Customs (HMRC) officers. The investigation resulted in six-figure VAT and Corporation Tax assessments being raised against the company on the basis that its cash takings had been suppressed for a period of about seven years.
After the company entered creditors’ voluntary liquidation, HMRC contended that it was owed more than £840,000. That figure was disputed, but the Secretary of State for Business, Energy and Industrial Strategy subsequently launched proceedings against the director under the Company Directors Disqualification Act 1986.
Ruling on the matter, the High Court found on the evidence that the director knew full well that the company’s VAT returns during the relevant period significantly understated its sales. Having deliberately brought about the filing of the inaccurate returns, he lacked recognition of what he had done and had exhibited a certain brazenness in attempting, without proper cause, to blame others.
Although he was in his 60s and thus had a relatively short working life ahead of him, the Court noted the public interest in confining company directorships to those who are fit to hold them. An eight-year disqualification was the minimum required to mark the seriousness of the case and act as a deterrent to others.