Anyone use SJD insolvency services?

[Philip Beck]

SJD Insolvency

I am the Liquidator for Optionis Group, which includes SJD Accountancy, Nixon Williams, Clearsky Accounting and First Freelance, and yes, I am still active. I don't normally post here as I have no time to get involved in marketing activities - and actually wouldn't want to anyway.

A lot has been said about SJD charging £2K for a liquidation and this being twice that of another well-known poster on this site , however when SJD Insolvency was set up as a joint venture I agreed with Simon Dolan 6 years ago it was better to charge an all-inclusive fee which would include the closure work that they were already charging for clients, whether this was for a strike-off or a liquidation, and they'd also get a free personal tax return in the year of distribution of funds in the liquidation so they knew their capital distribution and Entrepreneurs' Relief claim was being handled. We'd also reclaim the VAT incurred on the cost of the liquidation, which is a simple process, but does mean for the vast majority of our clients, who are or have been VAT-registered even if on flat rate, they don't need to factor in VAT on the cost of their liquidation.

I don't view it as a "golden handcuff" to charge a closure fee to clients who are choosing an outside Liquidator, as this work (final accounts and CT600 to liquidation, deregistration from PAYE and VAT and submission of final returns), is something that is necessary to go through as part of the process. It's merely that we quote the liquidation fee as inclusive of these costs which we can do through the joint venture agreement. Of course, that part of the fee which accrues to myself for doing the liquidation side of things is only a part of the total.

Although an outside contractor I am a trusted member of the Optionis team, so have access to all their confidential tax logins to check everything is up to date. We therefore also took the decision that we would distribute client funds in full one month into the liquidation after deduction of costs rather than pay an interim distribution, then waiting 3-4 months to get HMRC clearance to pay the rest. It's only in a small minority of cases that it turns out there's any additional tax to pay, and then it's almost always for a small amount anyway

The simple fact is most clients choose to stay with Optionis for their liquidations because it's a one-stop service with an all-inclusive fee like an all-inclusive holiday rather than booking a self-catering, flights separately, getting a taxi and going out for meals. For Optionis and myself, this is a business model which works, and the clients are happy.

Back to the day job !

[Maslins]

SJD's cheapest pay monthly accounting package includes completion of statutory accounts, CT returns, VAT returns, payroll and personal tax. If the client says they want to close and use an external liquidator, an extra £1,000 is required to do these otherwise included tasks. How is that anything but "golden handcuffs"?!

FWIW my personal view is it's not Philip who's the bad guy here. My understanding is in reality he's doing liquidations for ~£1k, similar to MVL Online...but he's obliged to charge the client £2k, handing £1k of that over to SJD accounting division to pay them for accounting/tax work the client has already paid them to do.

Ie if you use SJD accountancy, and you want to liquidate, they're going to get another £1k out of you however you choose to proceed.

If I've got this wrong, please do correct me and I'll apologise for any inaccuracies.

[Maslins]

My only concern is the safety of the Company funds after they've been transferred to the liquidator. I appreciate there's insurance including for these funds against malpractice but it's still a big worry to hand over a large sum of cash to a third party. That's the only reason I've been hesitant to date.

That is of course an understandable concern. The reality is if you're using a licensed insolvency practitioner (and there has to be one behind a liquodator firm to offer formal liquidations), and funds are transferred after the appointment of the liquidator, there should be no risk. To take on appointmensts liquidators have to be insured against these kinds of potential losses for clients.

The bank will instigate the transfer of funds to the liquidation estate account, at the request of the liquidator. Therefore if there were to be any mistake/fraud here, you (the client) are not at fault, and between the bank/liquidator's insurers they would cover any losses.

The liquidator then instigates the transfer of funds from the liquidation estate account to the shareholder(s) personal bank account(s). Again, it's the liquidator instigating this, not the client, so any errors/fraud would again be covered by the liquidator's insurance.

Worth stressing that the liquidator's insurance (often referred to as the "bond") is an absolute last resort. You can imagine a liquidator firm won't go for very long if they misappropriate client funds.

We would however recommend you do get the liquidator to instigate all the fund transfers. If instead you were to do things yourself (eg sometimes to get funds quicker liquidators may suggest you manually transfer funds prior to the liquidation starting to avoid delays as legalities of change of control of the company are processed), and you made a mistake leading to funds going astray, then you wouldn't necessarily be covered.

[Philip Beck]

SJD's cheapest pay monthly accounting package includes completion of statutory accounts, CT returns, VAT returns, payroll and personal tax. If the client says they want to close and use an external liquidator, an extra £1,000 is required to do these otherwise included tasks. How is that anything but "golden handcuffs"?!

FWIW my personal view is it's not Philip who's the bad guy here. My understanding is in reality he's doing liquidations for ~£1k, similar to MVL Online...but he's obliged to charge the client £2k, handing £1k of that over to SJD accounting division to pay them for accounting/tax work the client has already paid them to do.

Ie if you use SJD accountancy, and you want to liquidate, they're going to get another £1k out of you however you choose to proceed.

If I've got this wrong, please do correct me and I'll apologise for any inaccuracies.

SJD's closure fee is actually £450 + VAT, and is chargeable on ALL closures, whether a strike-off or liquidation, it's just that if using SJD Insolvency as Liquidator this is integrated into the liquidation fee. Also the personal tax return fee is £150 + VAT. The monthly fee only includes personal tax returns up to cessation, so a capital gains declaration and Entrepreneurs' Relief claim being outside the cessation period, is chargeable. If you were to add these fees to the £1K + VAT charged by the competition, then the total cost is £1,920 inc. VAT whereas we charge £2K all-inclusive with the VAT recovered for most of our clients who are VAT-registered. Pretty similar.

[Maslins]

SJD's closure fee is actually £450 + VAT, and is chargeable on ALL closures, whether a strike-off or liquidation, it's just that if using SJD Insolvency as Liquidator this is integrated into the liquidation fee. Also the personal tax return fee is £150 + VAT. The monthly fee only includes personal tax returns up to cessation, so a capital gains declaration and Entrepreneurs' Relief claim being outside the cessation period, is chargeable. If you were to add these fees to the £1K + VAT charged by the competition, then the total cost is £1,920 inc. VAT whereas we charge £2K all-inclusive with the VAT recovered for most of our clients who are VAT-registered. Pretty similar.

You're comparing VAT inclusive with VAT exclusive fees. Assuming not on flat rate scheme, a client should be able to reclaim VAT on SJD's accountancy fees, as well as liquidator fees (though this may involve liquidator invoicing in advance of VAT de-registration).

Regardless, you seem to be confirming what I said at the outset. Ie that if you're an SJD accounting client, the overall cost won't tend to work out much different whether you use an external liquidator or SJD insolvency services. The reason being SJD accounting will get a "closure fee" out of you either directly or indirectly.

[craigy1874]

A grand if you choose to use another liquidator....wow!

[ContrataxLtd]

I would imagine the clients have already paid monthly fees which would effectively cover the accounts, CT600 etc. so the closure fee is just to de-register from VAT, PAYE etc.? Seems awfully steep to me!

I hope there is a watertight agreement in place too between liquidator and the group if access is provided to tax logins etc. I certainly wouldn't be happy with that!

Martin
Contratax Ltd

[Philip Beck]

You're comparing VAT inclusive with VAT exclusive fees. Assuming not on flat rate scheme, a client should be able to reclaim VAT on SJD's accountancy fees, as well as liquidator fees (though this may involve liquidator invoicing in advance of VAT de-registration).

Regardless, you seem to be confirming what I said at the outset. Ie that if you're an SJD accounting client, the overall cost won't tend to work out much different whether you use an external liquidator or SJD insolvency services. The reason being SJD accounting will get a "closure fee" out of you either directly or indirectly.

If you don't bother to put in the work to reclaim the VAT, which we do, then we're entirely justified in comparing our VAT exclusive fee with your VAT inclusive fee. Although most of our clients are on flat rate, VAT deregistration takes a client off the flat rate scheme automatically so we invoice after deregistration date and reclaim VAT on a form VAT 427 for all clients other than the small minority who were never VAT registered in the first place. I note also that your IP is advising on his website that bond premiums do not attract VAT. This treatment is incorrect, as per Dear insolvency practitioner: Chapter 4: Bonding as the bond is chargeable on the practitioner, not the client, therefore the bond is not a disbursement that the client can pay directly to the insurer to avoid VAT.

[Maslins]

Re VAT on bonds, our understanding is different. That link specifically refers to "re-charging bond premiums to insolvent estates". We don't re-charge the bond premium, the client's funds pay directly to the insurer, and these aren't insolvent estates. I accept that semantically our comments are wrong as the bond cost is not technically a disbursement as such, it's a cost the client's company pays directly to the insurer. Ignoring semantics, our IP is happy they've verified with their regulatory authority what we are doing is above board. We've also been completely open with how we work re that, and submitting quarterly VAT returns on that basis for >6 years with no queries...but thanks for the heads up, and we agree there's some mixed opinions within the insolvency arena re this.

...we're entirely justified in comparing our VAT exclusive fee with your VAT inclusive fee.

Your comparison was not just with our VAT inclusive fee. Your comparison was with our VAT inclusive fee, plus the extra (questionable) closure fee from SJD accountants, and VAT on that too. Even when you compare all that, your own figures show it's cheaper than SJD insolvency. Either way, if you're an SJD accounting customer, you're going to pay a large chunk extra to SJD accounting when you want to close.

A much simpler comparison would be to compare a contractor who wasn't an SJD accounting client, so didn't suffer their additional closure fee. Then it is £1k+VAT vs £2k+VAT. Even if the VAT on ours isn't reclaimed that's still an £800 saving.

Clients are able to reclaim the VAT on our fees if they're keen to, but we appreciate as things stand it involves a bit of advanced planning on their part (get us to invoice prior to them de-registering for VAT). This may be something we revisit. When we started it was discussed, and decided that it wasn't worth the extra effort. Ie we'd potentially have had to charge a higher fee to cover for the extra work of reclaiming VAT (but not £1k extra). We're completely upfront about the VAT situation, it being in large print, one click from our homepage. Can the same be said for the SJD closure fee?

I haven't questioned the quality of your offering, merely that I think it's at best a bit iffy for SJD accountancy to milk the client for extra cash at that late stage of the company's life.

[Philip Beck]

Re VAT on bonds, our understanding is different. That link specifically refers to "re-charging bond premiums to insolvent estates". We don't re-charge the bond premium, the client's funds pay directly to the insurer, and these aren't insolvent estates. I accept that semantically our comments are wrong as the bond cost is not technically a disbursement as such, it's a cost the client's company pays directly to the insurer. Ignoring semantics, our IP is happy they've verified with their regulatory authority what we are doing is above board. We've also been completely open with how we work re that, and submitting quarterly VAT returns on that basis for >6 years with no queries...but thanks for the heads up, and we agree there's some mixed opinions within the insolvency arena re this.


Your comparison was not just with our VAT inclusive fee. Your comparison was with our VAT inclusive fee, plus the extra (questionable) closure fee from SJD accountants, and VAT on that too. Even when you compare all that, your own figures show it's cheaper than SJD insolvency. Either way, if you're an SJD accounting customer, you're going to pay a large chunk extra to SJD accounting when you want to close.

A much simpler comparison would be to compare a contractor who wasn't an SJD accounting client, so didn't suffer their additional closure fee. Then it is £1k+VAT vs £2k+VAT. Even if the VAT on ours isn't reclaimed that's still an £800 saving.

Clients are able to reclaim the VAT on our fees if they're keen to, but we appreciate as things stand it involves a bit of advanced planning on their part (get us to invoice prior to them de-registering for VAT). This may be something we revisit. When we started it was discussed, and decided that it wasn't worth the extra effort. Ie we'd potentially have had to charge a higher fee to cover for the extra work of reclaiming VAT (but not £1k extra). We're completely upfront about the VAT situation, it being in large print, one click from our homepage. Can the same be said for the SJD closure fee?

I haven't questioned the quality of your offering, merely that I think it's at best a bit iffy for SJD accountancy to milk the client for extra cash at that late stage of the company's life.

I think you're IP's regulator has got it wrong, and the Inspectors, while very good at insolvency law, probably don't know that much about VAT. The bond insures the practitioner, not the client, therefore it's not open to the client to pay the insurer directly to avoid VAT. It's like approaching your plumber to say "Hey, let's pay you cash directly and not put it through your employer's books". Has your IP asked HMRC Technical themselves whether approve this practice ?