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Loot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Now, top level games such as Grand Theft Auto V and Red Dead Redemption 2 have a cast of thousands and gross millions more than any movie and forthcoming titles such as Cyberpunk 2077 starring Hollywood A-listers like Keanu Reeves launch with all the glitz and glamour of a premier. 
 
 With all the additional talent, design work, writing and technological advances, the funding model of the industry has to be adequate to meet its demands. £50/60 or so for a top title is the average price and most gamers would think that’s fair. 
 
So what happens when software companies want to monetise their products further? 
 
A lot of games have additional content made available six months or so after launch that adds new missions, characters, clothes, weapons etc that aren’t available in the base game. This Downloadable Content or DLCs can be as much as £20 or £30, half the cost of the original game but add genuine additional content that isn’t essential to the main gaming experience. 
 
Some games have two or more DLC additions a year so users can purchase Season Passes which while expensive in their own right, see the purchaser saving money if they were to buy all the DLCs individually. 
 
Most gamers understand and accept the concept of DLC and it’s very much left to the customer to decide if they want it or not. 
 
Things have gotten more complicated recently with the addition of Loot Boxes to certain games. 
 
These could be seen as micro-DLC and offer cosmetic items to add to a character or in games such as FIFA 19, a footballer who you can add to your Ultimate Team - your online XI that you use to play other players and can include football superstars from all over the world. The best players, Lionel Messi or Christiano Ronaldo for instance, are the rarest and most valuable. 
 
They can only be obtained through purchasing Ultimate Team player packs using in-game coins. The coins can be acquired through completing various challenges within the game but the quickest way is to buy them using real money.  
There is also no guarantee with a player pack as to which players you are getting so if you are looking for your favourite player, you might have to buy a lot of packs which could quickly add up to hundreds of pounds.
 
Now executives with the software companies will point to the fun element of collecting players and the addictive surprise when it comes to opening packs. They recently told a panel of MP’s that they are more similar to Kinder Eggs in that respect, where the purchaser is just happy to receive any prize - not specifically the one they want. 
 
More sober commentators and experts reject this and think Loot Boxes are gambling aimed specifically at children, which a lot of evidence supports. Problem gambling and child gambling are becoming hot-button issues and games companies will be desperate not only to preserve this lucrative revenue stream but also avoid being labeled as child corrupters in an increasingly woke PR climate. 
 
EA, publishers of FIFA 19 also have previous when it comes to embedding loot boxes within a games mechanic and a public uproar saw them having to remove it from their Star Wars Battlefront 2 title. 
 
They will have taken notice of the ramifications facing the high street bookmakers industry when their main revenue driver - Fixed Odds Betting Terminals or FOBTs - saw their maximum stake limit reduced from £100 to £2. 
 
It’s an important lesson for any business with a defined revenue stream - things might be great when the sun is shining but one day the government or a lot of angry parents could suddenly decide that you’re persona non gratia and suddenly it could be game over. 
 
Many parents are finding children running up hundreds, even thousands of pounds on these loot boxes, with the money disappearing from their bank account or run up on their credit cards, putting them into debt problems. Basic parental controls don’t seem to be enough anymore as children are getting around them.
Chat to one of our expert advisers now and we’ll arrange a free initial consultation to discuss what your business can do if the money tap is turned off for good. We can advise on business funding for struggling companies or how to restructure and reinforce your business now before the difficulty level gets too much. 

early warning system
But what are the signs?

Every business has ups and downs but in our experience there are some common, unmistakable warnings that, taken together, can indicate that a business is off course and heading for rocks:

Some financial records are more informative than others. A healthy understanding of profit and loss is essential but there are several other indicators of businesses health that you need to be equally adept at interpreting.
Cash flow forecasts and figures, sales forecasts, debtor reports and bank reconciliations will give you a broader understanding of where your business is and where it could be going in the coming days, weeks and months.
As a director, you need to be able to access this up-to-date information, whenever you need to if you are able to make business decisions with full confidence. Without a clear view of what you owe and are owed, you may be blinded to any unforeseen consequences of your choices. For instance, if you offered over-generous flexible payment terms to secure a new contract, this could end up working against you if you then discovered you need quicker payment.

Reaching the credit limit in any account can happen, that’s why they have them, but if it happens regularly and/or with more than one account then it’s another warning signal.
Other factors could include being refused extensions to credit limits or extra credit and lenders requiring personal guarantees for finance or charges on assets. All of these could be additional signs of trouble, especially if you don’t have assets which can be used against loans.

Constantly being chased for payment isn’t a good look for any business. If you receive a Statutory Demand from a creditor because of unpaid bills, then you could be liable to face a winding-up petition if this demand can’t be settled.
This would put a company in significant danger of closure. Also once instructed to pay by way of a formal court order, there could be substantial late payment fees added to the amount making the situation worse still.

As we’ve discussed, businesses can go through peaks and troughs and you may occasionally have a customer or client who pays late or misses a payment schedule entirely. While none of these occurrences are your fault, they can become a problem for your business.
If you aren’t being paid, then you won’t be able to make your own payments. We’ve covered this previously in a post about how to manage cash flow when clients pay late which gives some tips on what to do to recoup these amounts.

Why get advice?

Being a Director isn’t just a great job with a fancy title, a parking space and a bigger paypacket - it involves statutory responsibilities for you to execute on behalf of staff, creditors and shareholders.
If you’re seeing any of these individual issues occur regularly or altogether then it might be a good time to get some professional advice. Any one of these could be due to any internal or external factor such as inefficient business functions, staff absence or mistakes or they could be symptoms of a wider weakness within the business as a whole.  
Business Rescue Expert are an experienced, qualified team who are on hand to help determine the root cause of your business issues and can provide you with the help, advice and solutions to diagnose and fix the problems and help you keep your business lively and alive.

Insolvency is never a certainty. The earlier the possibility is acknowledged, the more options and alternatives are available for you to explore and implement to avert the eventuality.

If a business is at risk of insolvency then the simplest way to alleviate that pressure is to increase incoming cash. Like blood in the human body, cash flow is the circulation that keeps a the heart of a business beating strongly. The stronger the flow, the more resistant to external problems and pressures.
Some simple tweaks to regular business operations can improve things. Processing invoices and payments when they occur rather than waiting until the end of the month; staying on top of debts owed to you and collecting frequently; not allowing excess stock to build up and keeping an accurate forecast of all cash flow based on existing in and out payments to ensure that every decision is evidence based on existing circumstances.

A petty cash box is one thing but regular business expenditure is another. Develop a system and discipline of logging each and every purchase so you can clearly see if there are any regular and unnecessary costs that aren’t benefiting the business. These can include membership and licence fees for services you no longer use. Studying them can give you an insight into where efficiencies and savings can be made.
Even small reductions in expenditure can add up to a big impact over time, especially if they are implemented company-wide.

Banks are only one option when it comes to business financing. Depending on your situation and asset base, there are other choices including factoring agreements to help you secure payments.
For example, this option will help you maintain a cash flow by sacrificing a small percentage of your costs to obtain it. This must be preferable to incurring further debt with lenders or existing creditors.

Maintaining a regular dialogue with creditors is essential in straitened financial times. One of the biggest and avoidable mistakes is to close down communication with creditors in difficult times. You might save face and pride but you will raise red flags on their behalf, exhaust any goodwill and the benefit of the doubt and make it more likely that they will resort to formal legal methods to obtain their owed debts.
Creditors will appreciate knowing in advance if your payment is going to be late and will be more likely to work with you and negotiate on payment dates and terms if you give advance notice and a clear indication of when and how you’ll be able to clear any debts. After all, they’re in business too and understand fluctuations in fortune and circumstances.
Building and maintaining a good relationship with creditors is essential in reducing the risks of insolvency especially when a winding-up petition can be brought against a company owing as little as £750.

Despite taking the proper decisions and right actions, sometimes it’s not enough and a business will become insolvent. There are still actions that a director has to reasonably take and will help them personally and professionally in the long run as the process follows its due course.
Here are some steps to help maintain your reputation and fulfill your legal duties to help insolvency practitioners work through their tasks efficiently and easily:

Honesty is always the best policy, especially when it comes to dealing with creditors. Letting them know the situation and that you will do your utmost to secure their funds will do a lot to cementing goodwill and building trust with them.  Depending on how the situation unfolds, you may need to rely on the better angels of their nature and having a good relationship with them in advance is one less variable to complicate matters.

Keeping up-to-date, clear financial and business records should be a standard business practice but is utterly essential in any insolvency situation.  Records of meetings, available information and decisions made on that basis will allow insolvency practitioners to understand the timescale of what happened, when, where and why and prove that you did your best to monitor issues and implement correct solutions wherever possible.

If you already have excess debt then it can be tempting to assume that taking on a little more at this stage won’t make any difference, especially if it allows you to make one more payment and buy a little time so that things might turn around.  
Don’t. The more debt you accrue means the more you will have to pay back later and your business has already reached the end of the line. Taking on more funds now not only won’t help but could cause legal issues when you’re unable to pay and investigators look into the circumstances surrounding the new debt.

The business assets you own and control are your most important advantages now and have to be protected and insured correctly. They can be presented as a means of payment to creditors if they are willing to accept them and will help your case.
Do not be tempted to sell these assets to gain additional funds as investigators usually consider this wilful misconduct at best.

Events might seem stressful and overwhelming but this is because you are not used to insolvency. The experienced team at Business Rescue Expert have been through hundreds of processes and will have dealt with every eventuality and circumstance you can imagine, and more you can’t.
The need for transparency and accuracy now is critical, just when you are at your limits. There are significant legal complications that can arise if mistakes are made in the process, even accidentally.
If your business is at the point of insolvency or by reading this article you realise it is closer than you thought then you need to take action. Call in the professionals and get some specialist advice to see if your business is recoverable, what steps need to happen to achieve this or whether insolvency procedures need to begin.

What next?

Fortunately the first step is the easiest.
Business Rescue Expert offers a free initial consultation to talk through your business’s unique circumstances and give their opinion based on the facts.
Get in touch today and take charge of your businesses destiny again. Email us at ask@businessrescueexpert.co.uk or use our contact form here.

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Whether you are a startup or SME, you will require finance at some point. However, there are several factors to consider about the range of SME funding options:

With that in mind, we’ll discuss the SME finance options below. It’s also important to note that, while traditional banks are still the predominant source of finance, smaller businesses are using a range of alternative methods to gain funding. According to the Small Business Finance Markets 2017/18, peer-to-peer lending increased by a staggering 51%, among others.
SME funding

Government grants

Government business funding is available for SMEs. However, obtaining a government grant is a competitive process. Typically, the government grants focus on particular business themes or purposes:

There are also regional grants that support growth and provide small business funding. For instance, your location may improve your eligibility for government business funding. While it can be challenging obtaining the finance, you do not have to pay the money back.
If the above business purposes do not relate to your company, the government also offers support through tax schemes and capital allowances, reducing tax liabilities. You can find more information here.

Venture capital funding

Venture capital is a form of investment at an early-stage for a business, with great growth potential. Unlike private equity - generally investing in a more mature company - venture capital funding involves investing in a new business, with many not yet making a profit. Aside from the SME funding, obtaining venture capital can also provide valuable expertise and guidance within the specific industry. Similarly, you will have additional resources and connections. However, you must consider that you may lose some control in your business, as the investors will likely want to become involved in the company objectives. Likewise, depending on their stake, you could lose management control.

Working capital loan

Working capital is crucial for all businesses - small or large. Without working capital, you cannot purchase stock, pay staff wages or undertake any other essential activities. When it comes to SME finance, working capital loans can meet everyday costs. The specialised loan, unlike larger business loans, is short-term and intended to cover a cash flow issue, or growth. Similar to the above options, there are advantages and disadvantages to a working capital loan. You will have the cash available to deal with any cash flow issues, and can spend it on the assets you would like. You will also keep ownership of the company. However, you will have to repay the loan and, generally, within a much shorter time period to that of a business loan. There is also the chance of a high level of interest, so you must consider all factors.

Invoice finance

If your SME is struggling to obtain a business loan, invoice finance may be a suitable alternative. This procedure can be a relatively quick way of accessing funds, using your invoices as assets. There are two types of invoice financing: invoice factoring and invoice discounting. There are differences between both, regarding sales and who is responsible for collecting payment. With invoice discounting, you retain control. On the other hand, invoice factoring involves a factoring company collecting payments. After you raise a customer’s invoice, the finance company will afford your company between 75-90% of the invoice value. While invoice financing does free up time in chasing late payments, you will lose profits on any invoices managed this way. More information can be found here.

Asset finance

Asset finance is an SME funding option, referring to a type of finance used by companies to buy necessary equipment and stock etc. In the case of startup businesses, cash is often tight and asset finance allows you to gain the tools for growth, without paying large, upfront costs. You can spread the cost of the asset over a longer period, regularly paying a charge. However, you cannot claim capital allowances on leased or hired asset if the lease period is less than five years. You may even end up paying more for the asset over a longer period.

Crowdfunding

Today, there are multiple websites helping to raise SME funding for relatively low cost businesses. Crowdfunding has experienced a boom, due to the likes of Kickstarter, and is an SME finance option. Crowdfunding enables you to set a target fund, over a period of time. However, it could prove difficult to obtain the small business funding without a unique idea, persuasive pitch and long-term plans for growth.

Peer-to-peer lending

As mentioned above, peer-to-peer lending has experienced a growth of 51% in the past year. Similar to crowdfunding, peer-to-peer lending connects your business with corporates and individuals that want to lend. As the bank has been cut out of the equation, borrowers often receive lower interest rates. However, those individuals or companies are investing in your SME, thus may become heavily involved in the future.

Advice for managing cash flow

Once you have obtained business finance, you must correctly manage your cash flow to ensure your company survives in the long-term.

Our business rescue experts will be more than happy to provide advice on SME funding options, and will work to find the best possible solution should you suffer from cash flow issues.

The insolvency legislation dictates that any disposal of property after the presentation of a winding up petition, or indeed the presentation of bankruptcy petition against an individual, is void. This means that any void dispositions (payments post-issue of a winding-up petition) can be reversed once a bankruptcy order, or winding up order, is made by an insolvency practitioner or the official receiver. The legislation is designed to stop the directors of a company from stripping the company’s assets on receipt of a winding up petition. Please note, if payments are made after the issue of a winding-up petition and the company isn’t subsequently wound up, the payments are not void dispositions.
Void dispositions cover all sorts of assets owned by the company. The assets can include plant and machinery and office equipment to cash at bank, debtors and intellectual property. If you receive a winding up petition and are unable to contest or pay, as a director, you must abide by these restrictions in order to avoid liability. If a voidable transaction is made, you may be personally liable to compensate the estate if the asset cannot be recovered from the beneficiary.
Validation Order

When can I obtain a validation order?

The key part of the legislation is that transactions made after a winding up petition has been presented are void dispositions, unless the court orders otherwise. Consequently, it is possible to obtain a validation order to allow some payments to be made. While a winding up petition is outstanding, an application to court can be made to allow access to a frozen bank account. However, this will only be granted in certain circumstances. There will generally be restrictions on how the funds can be used:

In short, the court will not generally grant a validation order that would have a detrimental effect on assets available for creditors after a winding up order has been made.

What is the process to obtain a validation order?

In order to apply for a validation order, you will likely need the assistance of a solicitor specialising in insolvency. Depending on your exit route from the winding up petition, you will need an insolvency practitioner. Your solicitor will prepare an application on your behalf and a witness statement to set out your evidence as to why the validation order should be granted. This will need to be comprehensive and include:

You’ll also need to provide:

Your solicitor will, generally, liaise with the petitioning creditor prior to issuing the application to find out if they will oppose the validation order application. If they intend to oppose the application, even more evidence may be required to support your application. This will often be subject to additional scrutiny from HMRC winding up petitions.
In terms of costs of a validation order application, they are, unfortunately, significant. An uncontested application will, generally, cost at least £5,000, including court costs and barrister’s costs. This is attributable to the urgent nature of a validation order, with most applications having to be dealt with within a week. Court hearings are usually scheduled 6-8 weeks in advance, so urgent hearings of this nature bear additional costs to ensure they are reserved only for urgent matters.
If the court grants the validation order, you will either be able to regain access to your previously frozen bank account, or you will be permitted to make specific transfers of assets of funds as designated by the order.

Can I obtain a validation order retrospectively?

Historically, a number of parties have sought to obtain a validation order retrospectively when the liquidator or official receiver has sought to recover voidable transactions. Previously, transactions carried out in the normal course of business would be validated by the court retrospectively. However, recent case law has set a much higher standard.
Validation orders for potential void payments should be sought ahead of the payments being made. If not, there is a serious risk of liabilities on the recipient as well as personal liability on the director.

Final thoughts

It is worth bearing in mind that a validation order is often a patch for a larger problem. Unless you are able to pay the petition debt, and continue to run your business as a going concern, you may wish to consider alternative insolvency procedures. You should do so ahead of the winding up order being made to take control of the situation. If you are having difficulties with a winding up petition and a frozen bank account, our business rescue experts can help you take the urgent action needed to resolve your situation.

Company administration is a formal insolvency process, referring to the directors, the shareholders, or floating charge holders placing the business into administration. A licensed insolvency practitioner (IP) is engaged to provide a clear path as to the future of the business and the IP will work with the primary aim of saving the company. Administration is a time restricted process, which must be handled by a licensed IP.
Company Administration Employee Rights
The first 14 days of the company entering administration are crucial for your employee statutory rights and responsibilities. Once a company has entered administration, the administrator is not required to cover employee contracts within the first 14 days, whilst they establish their strategy. They will, however, generally ensure employees are paid for this period to ensure the employees continued assistance.
During this time period, the administrator can confirm they are “adopting” the employee contracts, and after 14 days, they will be automatically adopted. This means that the company in administration will be required to meet any pay entitlements accrued during the administration ahead of the costs of administration.

Sale of business in administration

If the business happens to be sold on, your employee rights in administration are protected under the TUPE legislation. The Transfer of Undertakings (Protection of Employment) legislation protects those who have retained their jobs. The terms of your employee contract will be held under TUPE legislations, and the new business must comply with the conditions.
This will also mean that the start date of your employment remains the same as if you had continued working for the company in administration. Your new employer should give you formal notice of the transfer. It is also important to note that TUPE cannot be contracted out of. If your new employer tries to ask you to sign a new contract of employment on less favourable terms you should seek legal advice from an employment solicitor.

Preferential creditors

As detailed above, the first 14 days will demonstrate your employee rights in administration. If you’re made redundant as a result of the administration procedure, any entitlements accrued prior to the administration period will become either a preferential or unsecured claim in the administration, or possibly both.
When a company faces an insolvency procedure, a hierarchy of creditors is produced, listing the order of payment. Employees as preferential creditors are high up in the hierarchy. They will be paid after any holders of fixed charges, but before any holders of floating charges.
The administrator overseeing the insolvency process will handle the employee entitlements and subsequent payments, via the redundancy payments office. If you are a preferential creditor, you are entitled to:

Non-preferential creditors

In some cases of company administration, there may not be enough recouped from the sale of assets to pay all employees’ full entitlements. Where there is a shortfall, this can be claimed through the National Insurance Fund (NIF). The NIF, administered by the Redundancy Payments Service, covers redundancy and statutory payments. Unfortunately, those who are self-employed or agency workers are not entitled to payments from the NIF.
The National Insurance Fund aims to provide payments within two to six weeks of you submitting employee rights claims. The payments are submitted under the provisions outlined in the Employment Rights Act 1996. It’s important to note that you may not receive all you have asked for, but, the top of the preferential claims above, you are also entitled to submit claims for:

Claims are currently capped at £489 per week, this amount generally increases in April of each year. Any amounts in excess of this amount will be subject to the usual order of payments in the company insolvency process and will only be met if there are sufficient assets to allow for a distribution.

Statutory notice pay

Statutory notice is mentioned above and refers to the legal notice your employer must provide for those losing their job. However, if your employer dismisses you without warning or even if you work your notice period but do not receive payment, you can claim statutory notice pay. For the latter, you will have to write to the Insolvency Service, who will discuss your claims.
The payments you may receive depend on your length of employment with the company. For example:

The redundancy payments service will expect you to claim any state benefits you are entitled to in this time period and to be actively seeking work. Consequently they will automatically make deductions for state benefits and even further deductions from this if you have found alternative employment.
If you would like to discuss the company administration process for your business or if you are concerned about employee entitlements and procedures you must follow, you can speak to our business rescue experts today.

Whilst both the Members Voluntary Liquidation (MVL) and Creditors Voluntary Liquidation (CVL) are entered into voluntarily, there are several key differences to be aware of. The reasons for opting for the procedure tend to be different, as are the proceeds of assets realised through both processes. After a members voluntary liquidation, the proceeds go to the company shareholders. However, the funds realised through a creditors voluntary liquidation will be returned to the creditors, once the costs of liquidation have been paid.
Members voluntary liquidation

Members voluntary liquidation process

Essentially, an MVL is undertaken by solvent companies to wind up and distribute company assets, looking to release cash in the most tax-efficient method possible. This procedure will result in the end of your company, but you can extract the value of the business in cash. The final distributions of an MVL can be used as capital distribution, rather than profits. Similarly, if you are entitled to entrepreneurs relief, which we have touched on below, you can, typically, expect reductions in tax. A high rate taxpayer would, generally, expect their income to be taxed at 40-45%, but entrepreneurs relief could see that reduced to 10%.
Although members voluntary liquidation is entered into willingly by company directors, the voluntary winding up petition must be advertised in The Gazette. You can find further information on the procedure here. The MVL process is not considered an insolvency procedure, so will not affect your company in the same way as creditors voluntary liquidation, but both processes ultimately result in the closure of your business.

Entrepreneurs relief in members voluntary liquidation

As mentioned above, entrepreneurs relief allows business owners liquidating a limited company to pay a lower rate of capital gains tax on the proceeds of the closure, rather than income tax. Entrepreneurs relief could see some shareholders charged 10% capital gains tax on the distribution they receive, which is immeasurably more favourable than dividend taxation rates.
However, as a note, HMRC has recently brought out changes to entrepreneurs relief to be aware of. For example, if you choose to close your business through members voluntary liquidation, with 10% tax capital gains tax charged using entrepreneurs relief, but open a business of the same nature, trading within two years - HMRC may believe you closed the previous business for tax advantages, and will reclassify this as income leaving you liable for income tax and national insurance contributions. You can read more about the HMRC entrepreneurs relief changes here.

Creditors voluntary liquidation process

Creditors voluntary liquidation is initiated by the directors and shareholders of the business, where they are looking to liquidate a company which is unable to pay its debts. Unlike an MVL, the CVL refers to an insolvent company, but both processes must be carried out by a licensed insolvency practitioner (IP). By entering creditors voluntary liquidation, you limit personal liability and avoid the threat of compulsory liquidation.
A CVL is designed to protect the creditors, and the licensed IP will work to realise company assets and recoup debts for the creditors. The threat of creditor pressure could be a primary reason for voluntarily entering into this process. You can find more information on the timeline here, and look into the order of payment for creditors here.

Redundancy relating to CVL

Employees will be made redundant due to the liquidation of the company. If the company is unable to meet the costs of employees’ redundancy entitlements, they may also be able claim to the Redundancy Payments Office for redundancy pay, notice pay, unpaid wages, and outstanding holiday pay. This also applies to directors who have contracts of employment with the company, and if you are struggling to pay the costs of liquidation may be used as an option to cover these.

Is there a time when an MVL can become a CVL?

As mentioned at the beginning of the article, the MVL is undertaken by a solvent company and is, subsequently, advertised in The Gazette. If the company has outstanding debts that have not been settled, this public notice of liquidation could lead to creditors coming forward and submitting claims against your business, possibly pushing your firm to insolvency. If the company becomes insolvent or the liquidator discovers it is insolvent, the liquidation will then be converted into a CVL.
If this happens there is the chance that criminal charges may be brought against the director of the company. It is therefore important that full disclosure is given as if it emerges that a company is insolvent after giving a declaration of solvency, you will likely face serious repercussions.

Seek advice

If you are looking to close your business, but unsure which of the two processes is most suited to you, don’t hesitate to get in touch. Our business rescue experts are licensed insolvency practitioners and can offer guidance on which process will work best for your corporation.

For companies not paying their HMRC VAT payments on time or only making part payments, this is a serious indicator of significant problems with company cash flow. It is mandatory for all businesses to file their VAT return online and make payments within the due dates. The deadline for submitting your business tax return is one calendar month, and seven days after the accounting period. You do have the option to enter your online account and receive reminders for the due date of your VAT return. However, if you do miss the payment date, there could be severe consequences.
HMRC VAT Penalties
HMRC does allow some forgiveness for a company if it is their first late payment within 12 months, but you will be sent a surcharge liability notice (which we will explain in further detail below). If you miss another deadline, you will incur further penalties for your business. It’s important to note that HMRC VAT penalties are not only due for late filing, but can also be imposed on companies paying the wrong amount, or in cases where false declarations are made.

Late registration

Every business needs to ensure their VAT payments are dealt with correctly and on the date they are due. The annual VAT registration limit is £85,000, and if your turnover exceeds the total, you need to apply for VAT registration within 30 days of this occurance. If you do not, there are VAT penalties for late registration. If you suffer VAT penalties for late registration, you will have a percentage penalty applied to your business, unless you can provide a valid reason for the delay. The first point to note is that this applies to any 12 month period and not just relating to your company tax year. You cannot wait until a convenient time to register after you have hit the threshold as you will be liable for late registration penalties.

Smaller business

Smaller businesses will be treated more lenient to that of larger companies. If your business happens to turnover less than £150,000 these are the following VAT surcharges you will face:

Larger business

If your business has a turnover of more than £150,000, there are more pressing consequences for your company.

Default surcharge

A default surcharge notice is issued for late payments. It is one of the common HMRC VAT penalties, and refers to a percentage of the amount of tax is owed. The charts above are what your business will be charged.
The default surcharge will last 12 months from your late submission or payment. However, if you incur further late payments, those 12 months will be extended. If you do not have any more late payments in the 12 months, you will leave the default surcharge regime.
Your company can apply for a VAT surcharge appeal, but you must demonstrate your attempts to pay on time and provide valid reasons for not doing so. If your VAT surcharge appeal is successful, the penalty will be cancelled. In recent years, most VAT surcharge appeals are ruled in favour of HMRC.

Valid VAT surcharge appeal reasons:

Insolvency

If your company does not pay their VAT payments on time, HMRC will begin to think your company is facing serious cash flow issues and heading to insolvency. If they believe your company is insolvent and continuing to trade, HMRC will act quickly against your company. You may be able to enter into a time to pay arrangement, which will mean any penalties may be waived as long as you stick to the agreement.
Failing this if you are struggling to pay HMRC VAT and associated penalties, you need to seek advice as soon as possible. Our business rescue experts can provide business funding advice and guide companies facing insolvency.

Company voluntary arrangement explained

As mentioned above, a CVA is a business turnaround tool rather than a terminal insolvency procedure. A company voluntary arrangement is an insolvency procedure providing a contractual arrangement between your business and creditors to pay back what you can afford, based on your business cash flow. However, like all insolvency procedures, there are benefits and consequences. Our guide to the company voluntary arrangement will take you through the process. You can read more information on the timeline of the procedure here.

Advantages of a CVA

Advantages of a CVA

Director control

While liquidation and administration remove a company director’s powers, you are still entitled to keep control of your company with the CVA procedure. Liquidators and administrators are assigned to recoup as much as possible for creditors, removing your position of power and selling company assets. A CVA allows you to control the business recovery plan and carry out the company voluntary arrangement obligations. You will still have to comply with the terms of the CVA proposal, but you continue to oversee the day-to-day running of the company.

Relief from creditor pressure and legal action

Creditor pressure is one of the most significant signs of financial difficulty, but entering a CVA protects your company from said creditor pressure. A licensed insolvency practitioner will assist your company with the CVA proposal and once the CVA is approved, creditors bound by the proposal cannot take further legal action. For companies that have a viable chance for recovery, this could post the most significant opportunity, as long as you comply with the CVA proposal. Your company cannot be wound up during once the CVA is in place unless you incur further credit or fail to comply with the terms. However, if a winding up petition has been submitted, a CVA could be a better alternative to liquidation for the creditors.

Creditor and company benefit

It will often be the case that if your company enters liquidation there will be insufficient assets to repay any monies to creditors. However, a CVA, when compared to liquidation offers a better return to the creditors. While they still may not receive all monies owed, they can recover more than in winding up. It is in their best interests for your company to succeed and the CVA process can even improve your business cash flow - thus meaning you can recover more for the creditors in the future.

Avoids liquidation

Speaking of liquidation, the consequences for your company are severe. A company voluntary arrangement allows your creditors to receive payment in installments, and keeps you in control. Liquidation will almost certainly result in a full loss of control as well as your company being completely closed down.

Less damage to your reputation

The CVA procedure may result in difficulties for the company in obtaining credit, but it’s far less damaging for your company reputation than liquidation. If your company were to enter administration, a notice will be placed in The Gazette alerting all interested parties to the insolvency. In doing so, your customers may see this and lose faith in your company, causing further financial problems. However, a CVA is only published at companies house and to creditors, giving your company the time to recover and make the necessary restructuring changes.
While the advantages of a company voluntary arrangement outweigh various other insolvency procedures, there are disadvantages to consider.

Company Voluntary Arrangement Disadvantages

Issues obtaining credit

Accessing credit from banks and suppliers will become extremely difficult to do, which may have an adverse effect on your ability to trade moving forward with suppliers requiring payment on cash terms. However, this is the trade off against not being able to trade at all in the instance of your company being wound up. Unfortunately if some suppliers are included in the CVA, they may refuse to work with you moving forward and you will need to find an alternative. This can be a very difficult situation where specialised goods or services are provided.

Cost burden

Signing up to a CVA is a serious financial commitment as they usually last for 5 years. Failure will often result in the Supervisor of the CVA being forced to wind up the company either with your cooperation or through the courts by way of a winding up petition putting you back to square one. For the CVA to be viable there must be a material change in the trade of the business and you must be able to demonstrate it is the burden of historic debts holding it back, not that it is not currently turning a profit. If the latter is the case it may be more prudent to consider creditors voluntary liquidation.

75% of creditors need to agree

In the corporate insolvency market, CVAs account for only around 2.5% of all insolvencies. Liquidation and administration are more common and a company voluntary arrangement may not be viable. A licensed insolvency practitioner will check to see if it is an option and work on a proposal with you. The creditors would then vote on the proposal and 75%, or over, must consent for the CVA to be accepted. For more information, we have outlined what makes a successful CVA.
Our business rescue experts can provide advice and aid in obtaining a CVA. You can get in touch with our insolvency practitioners via the contact form.

In this article, we will outline what is a liability order, and the action you need to take should your company receive one.

What is a liability order?

A liability order is a court demand for you to pay the full amount of business rates you owe, along with additional costs. Before your company has a court liability order submitted against you, a summons will be sent. The summons is the action councils take before sending your firm a liability order. This document details the date and time for your Magistrates hearing, to consider whether you will be issued with a business rates liability order.
Liability Order
As soon as the summons is posted, your company will incur costs of £61. The best option for your company is to pay your business rates in full, but we understand this may be difficult if you are suffering from cash flow problems. However, if you do not pay the total of your business rates, you will be charged a further £14 in council costs. This brings your council costs to pay up to £75, as well as your business rates in full.
The council will state that you do not have to attend the Magistrates court in regards to the summons. However, this will sacrifice your chance to explain your company’s predicament, and a liability order will automatically be issued in your absence.

Can I appeal the liability order?

You can appeal the order. However, it is a very costly and expensive route to take, with a small window of time to do so. Similar to applying to set aside a statutory demand, you have to act fast when it comes to a court liability order.
It is advised that you contact the council before your summons hearing and explain the company’s situation. All effort should be made to negotiate a payment plan. If the council accepts your finance issues, they will cancel the summons, thus stopping the liability order enforcement against your business. You can also dispute the bill if you believe it to be incorrect.
There are several reasons as to why the Magistrates may not submit a court liability order against your company. We have outlined the reasons as follows:

To save time and costs for your business, you should seek urgent advice from the council if you are struggling to pay your business rates. A payment plan is the best course of action for your company. It’s also worth noting that the belief you should be provided a discount, or exemption, on your business rates is not a valid defence for the liability order.

What are the liability order powers of enforcement?

If you did not attend the court and a liability order has been issued, the council gains further powers. Submitting a court liability order allows the council greater powers in collecting the debt your business owes. They can collect the debt through a variety of methods:

What should I do?

If your company is suffering financial issues, seek advice as soon as it becomes apparent. The longer you ignore the problem, the worse it will be for your long-term standing. We have outlined the business funding options for struggling companies with our comprehensive guide. If you have received a summons, we urge you to contact the council immediately and attempt to put a payment plan in place, before the inevitable business rates liability order is issued.
If you would like to speak to someone regarding your business funding issues, you can get in touch with one of our business rescue experts for free, confidential advice.

As mentioned above, this article will outline the process for relief from forfeiture under the terms of the Law of Property Act 1925. Subsequently, it will also share how that will affect your business and what you can do to attempt to overcome the proceedings.
Landlord’s rights give your landlord the power to forfeit your lease under Common Law, if your business falls into commercial rent arrears. The termination of your lease is known as forfeiture. This enables the landlord to enter the property when you are not present to take back control of the premises, most commonly achieved by changing the locks outside working hours. Typically, most landlords will use a certified bailiff to do this.
Relief from Forfeiture
Forfeiture means that your lease is terminated immediately. You can find out more information on this process with our Landlord’s Rights with Commercial Rent Arrears post. However, there are some circumstances that may see your landlord, and your company, continue on with the lease after forfeiture; this is known as relief from forfeiture.

What is Relief from Forfeiture?

If you and your landlord agree to continue after forfeiture of commercial lease, this is, effectively, known as reinstating the lease. Usually, this will mean you have succeeded in paying your commercial rent arrears.
Should you look to reinstate your lease, you will have to go through a long process to do so. As the tenant, you must apply to the court for relief under section 146 of the Law of Property Act 1925. This application is to set the forfeiture lease aside, and the court has the discretion to grant relief from forfeiture or withhold, in favour of landlord’s rights.
Courts will generally grant relief if the tenant has remedied the breach or paid compensation, for example. They can also grant relief if they believe your business will be able to pay and stick to the terms of the lease in the future. Your company’s conduct will therefore be a consideration when applying for relief from forfeiture of a commercial lease.
Before you undertake this process, however, you must consider the costs of the application.

Who pays?

The process of relief from forfeiture is costly for a company, especially as you are already suffering from commercial rent arrears and inability to trade without a premises. In most cases, the tenant will have to pay for their costs and legal fees, as well as those of the landlord when applying for relief. Therefore, applying for relief from the courts may not be the most cost-effective process for your company.
There is a six month time limit to seek relief from forfeiture if your landlord has opted for terminating the lease. Where the landlord has obtained an order for possession by the court, you do not have a right to claim. However, if they have not and your landlord has forfeited by re-entry, you do not have a time limit to claim.
The costs of the proceedings could outweigh the benefits of applying. If you are not granted relief, this could pose a further threat to your business, as the business will be without premises. In such cases, an alternative to the situation could be voluntary liquidation.

Voluntary Liquidation

Creditors voluntary liquidation could be a viable option if you are suffering from commercial rent arrears, and your landlord is looking into terminating the lease. As we have outlined how the process of relief from forfeiture is costly for a tenant, and voluntary liquidation allows you to take control of the situation.
With voluntary liquidation, the company’s director/s choose to end the business and stop trading. By appointing a liquidator, you choose to liquidate all company assets before insolvency is forced on your business; a very real possibility if you have cash flow problems.
Seeking advice in relation to voluntary liquidation will lead you to discuss your concerns with a licenced insolvency practitioner. They will be able to suggest how your current business could be rescued in its current form or by way of a new company buying the assets, potentially via a pre-pack asset sale. You can find more information on the voluntary liquidation procedure with our comprehensive guide.
To discuss your options if you are suffering from commercial rent arrears, or have any questions regarding voluntary liquidation, feel free to contact one of our business rescue experts today.

Business Rescue Expert is part of Robson Scott Associates Limited, a limited company registered in England and Wales No. 05331812, a leading independent insolvency practice, specialising in business rescue advice. The company holds professional indemnity insurance and complies with the EU Services Directive. Christopher Horner (IP no 16150) is licenced by the Insolvency Practitioners Association

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