Failed 'Ltd' companies blame accountants
Tax advisers are being urged to pay closer attention to their clients' financial health after a spate of failed limited companies blamed insolvency on their accountants.
Under questioning by insolvency experts Wilkins Kennedy, almost all company owners put their troubles down to accounting advice given by a professional adviser.
The vast majority of the directors had taken dividends or loans which were illegal, though claimed that their paid, external adviser was responsible for the activity.
Keith Stevens, of Wilkins Kennedy, told CUK: "In almost every recent case, the director said 'My accountant told me to do it' or 'I did it because my accountant told me to.'"
Speaking yesterday, he explained that the threat of accountancy firms facing legal action was credible enough that the industry wanted to meet in the coming weeks to discuss the issue.
"All accountants need to take more of an interest in their client's accounts...[otherwise they] might face legal claims for giving the wrong advice," Mr Stevens said.
"But of course it's not just the accountants; the owners and directors of limited companies can't shirk their duty to ensure that they act, or did act, responsibly."
As Wilkins Kennedy explains, a dividend or loan would be considered illegal if the company did not have the accumulated profits to cover the dividend/loan payment.
HM Revenue & Customs are so concerned that illegal dividends mean firms are ducking their tax debts that it has asked insolvency experts to hone in on this problem.
"Although the Revenue cannot chase the director as an individual person," Mr Stevens said, "its officials can task an insolvency practitioner to" do it for them.