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Tax debt disqualifications dominate Insolvency Service stats

Director disqualifications due to tax debts an increasingly large proportion of Insolvency Service figures - lawyers warn that the service is not dealing with other types of activity

IS THE Insolvency Service eschewing criminal investigations of directors, instead leaving the taxman to mop up those who have racked up large debts? That is the claim of Michael O’Maoileoin, an insolvency expert at law firm Hugh James.

Analysis of the latest Insolvency Service enforcement record data from the Insolvency service shows the percentage of director disqualifications due to tax debts has jumped in recent years. The percentage was 62% in 2012/13, 52% in 2011/12 and 35% in 2010/11.

But the disqualifications for criminal matters was just 54 in 2012/13, from 259 in 2010/11.

Michael O’Maoileoin, from Hugh James, said: “Proving that an insolvent company has run up a large debt to HMRC is pretty straightforward, but proving more significant wrongdoing may take months of painstaking work by forensic accountants.”

“Since its budget was cut, the Insolvency Service simply can’t afford to do as much of that kind of work as it used to. It is still bringing in the same amount of low-hanging fruit from tax debts, however.

“It’s also a matter of serious concern for the wider business community, because it makes it more difficult for businesses to be sure of the real track record of any director that they are doing business with or even employing.”

An Insolvency Service spokeswoman said that all allegations of misconduct and negligence by directors were taken seriously, with investigations “a priority”.

“In the last ten months to January 2014, we disqualified over 1,053 directors,” said the spokeswoman.

“We have a well-defined and rigorous process to determine which cases should be investigated. Not all investigations will lead to a disqualification, we have to find evidence that we can put before a court to support the making of a disqualification order. Over 10% of disqualifications are for 11-15 years, on average the disqualification period is around 6 years.”

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