Taxman disqualifying more 'Ltd' directors

A growing number of directors of insolvent companies are the target of disqualification proceedings launched by HM Revenue & Customs.

For failing to pay their company's taxes, 813 directors had proceedings brought against them in court by HMRC, compared with 654 in the previous year.

That represents a 24% leap in disqualification actions, casting doubt on the Revenue's claim that it is taking a more lenient approach to firms with cash flow issues.

"This is a huge increase in court proceedings against directors," said Philip White, chief executive of Syscap, a financing company, which obtained the figures.

White said the figures were a "wake-up call" for directors of limited companies with cash flow problems, partly because the fragility of the UK's recovery might make them expect a sympathetic response from HMRC.

Pointing to other data from the Insolvency Service, he added: "It's all the more shocking because the number of company insolvencies has declined sharply over the last year."

Disqualification orders ban individuals from being directors of a limited company, or from being involved in the promotion, formation or management of one for up to 15 years.

"Directors often choose to pay suppliers over HMRC in the belief that this will ensure the immediate survival of their businesses," said White.

"[But] continuing to trade while neglecting to pay HMRC is a risky strategy that could backfire if the company subsequently becomes insolvent."

Directors who are disqualified have unlimited liability for the losses of any company that they have been involved with, and may also be criminally liable.

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