COVID-19: Strike Off
It is a continuing challenge keeping up with changes in government guidance and legislation for business, and we highlight two key developments this month.
Strike off
Companies House will soon be pressing the ‘start’ button on compulsory strike off against companies following the pause trigged by covid-19. Temporary measures to suspend voluntary strike off action have already been lifted (as of 10 September).
To rewind briefly, in mid-April this year, government announced that companies who are late in filing their annual accounts or confirmation statements will still be written to, but Companies House would temporarily pause the strike off process to prevent them being dissolved. The pause gave companies time to get their records in order at a very difficult economic time.
Remember that Companies House automatically extended various filing deadlines that fell after 27 June (these can be checked at the Companies House Service), in which case there is no need for companies to apply for such extensions.
On 10 October, the protection against strike off will be lifted and Companies House will carry on with the process of striking off companies it believes are no longer carrying on business or in operation. For example, if company documents are outstanding and deadlines unmet; and it has received no response to our letters from Companies House.
Compulsory strike off action will also be resumed if letters sent by Companies House are returned undelivered; and or where the company has no directors.
After two warning letters have been sent out, Companies House will then publish a notice in the Gazette. Absent objections to dissolution within two months of that notice, the company will be struck off the register shortly afterwards.
If a business wants to remain on the register it must now file outstanding documents urgently or contact Companies House.
The Finance Act
Businesses and their advisers ought also to note two key provisions in the Finance Act (which received Royal Asset on 22 July) which has implications for business that become insolvent and, in some cases, their individual owners.
Particularly, HMRC now has power, in some cases, to make individuals jointly and severally liable with a company, for certain HM Revenue and Customs (HMRC) debts of that company – where there are least two companies in which an individual had a relevant connection. This is effectively piercing the corporate veil to pursue a debt; and the power will be exercised in cases of “repeated insolvency and non-payment” and tax avoidance and evasion.
There are further conditions for the power to be exercised, for example, the individual must also have a relevant connection with a new company which carries on a business that is essentially the same or similar to the former companies.
Also, from 1 December this year, HMRC will move further up the priority list of creditors where a business is insolvent - leaving less cash available for those further down.
What does this mean?
The business world has been hard hit by covid-19 and it will not improve any time soon for the vast majority of businesses and sectors. Short term government measures to help businesses weather the storm cannot remain in place indefinitely, which means some companies face being struck off- whether compulsorily or voluntarily - while others may be able to buy themselves more time.
Business owners should take urgent professional advice as to the implications for them as a business and individually to ensure they can tap into any support available.
If you would like us to cover an issue in the next NGM Tax Law Newsletter, we would be pleased to hear from you