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Client company liquidation and CJRS

Received an email to say clients company has sought insolvency even though CJRS is being claimed.

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Not quite sure what to do with this one.

Up until last week I had been processing furlough for a client. He was a director /employee of his Ltd company, who had been in hospital with covid last February and has claimed furlough ever since.

Accounts, vat etc all behind, he genuinely has not worked in any capacity. 

However, I today received an email from an insolvency practice as being one of his creditors. It's the first I heard of this and had client consulted me, id probably have advised against it. The company literally had nothing and just owed me and hmrc in late filing penalties. 

Anyway the issue I have is, had he informed me this was his intention I would not have made the furlough claim for him only last week, which he know I would be. 

Do I have a duty to report the fact that he has instructed me to claim furlough whilst also under the opinion that the company is insolvent? 

Replies (14)

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By Paul Crowley
20th May 2021 18:27

Liquidator will see the grant as it goes to the bank account.
His problem to resolve and if needed, to add another creditor.

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Replying to Paul Crowley:
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By Hugo Fair
20th May 2021 19:16

+1
Presumably no longer your client, so the FPS to 'support' CJRS claim may not have been filed anyway (in which case HMRC will/should simply refuse the claim).
Lack of joined-up depts within HMRC ridiculous ... based on what OP says CJRS claims should have been stopped a while ago (not on moral basis but because client's business wasn't being restricted by Covid as opposed to ill-health).
It'll be interesting to see what eventually transpires (if anything) as support for sufferers of long-covid, where individual sickness rather than business restrictions are the issue.
But you were given (or made aware of) no reason not to submit CJRS claim before sending it, so not your problem.

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By Matrix
20th May 2021 19:46

He probably has a BBL and is going down the CVL route.

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Replying to Matrix:
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By SXGuy
20th May 2021 20:04

You may well be right. Last accounts made upto Feb 19 so possible!

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David Winch
By David Winch
20th May 2021 20:03

Who were you thinking you might have a duty to report this to?

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Replying to davidwinch:
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By SXGuy
20th May 2021 20:06

Hmrc I guess. I don't know. Usually I could declare an over payment in a future claim period, but there won't be any now I know he's made a petition for insolvency.

Not even sure if I should be disengaging at this point as well.

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Replying to SXGuy:
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By Hugo Fair
20th May 2021 21:17

FWIW if it makes you feel any better regarding your original question ... "Do I have a duty to report the fact that he has instructed me to claim furlough whilst also under the opinion that the company is insolvent?"
... the latest Agent Update from HMRC contains the following "Remind your clients that if they do not pay the associated employee tax and NICs to HMRC, they’ll need to repay the whole of the CJRS grant to HMRC."

So for any months that your ex-client failed to pay his PAYE bill, HMRC will be going for full repayment of CJRS monies.
And, yes, I believe you should not so much "be disengaging at this point as well" - but recognise that you have been disengaged.

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Replying to Hugo Fair:
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By SXGuy
20th May 2021 21:45

OK thank you. That's made things slightly clearer re engagement. With regards to paye hes declared salary was below ant ni or tax so he'd have had nothibg to pay anyway. I have a feeling any debts are related solely to companies House and hmrc penalties and assessments. Although I have not had any correspondence regarding any penalties so its all very baffling.

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Glenn Martin
By Glenn Martin
20th May 2021 22:07

What has he done wrong? The CJRS comes into the company and paid out to staff which I assuming he is. He is an employee until the company goes into liquidation so is entitled to be paid until that point. HMRC pay notice periods holidays in those circumstances, anyway so cannot see what you think is wrong.

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Replying to Glennzy:
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By SXGuy
20th May 2021 22:21

Fair enough. I was just thinking that if he believes the company to be insolvent he should have informed me to cease claiming.

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Lisa Thomas
By Lisa Thomas
26th May 2021 15:11

At the moment all you seem to know is he has taken advice from an IP. That would be unlikely to mean he has 'petitioned for insolvency' as a petition would indicate a compulsory liquidation via the Court, whereas an IP would normally assist with a creditors voluntary liquidation, which is a very different procedure.

The client might have just taken advice on future insolvency to explore what happens if the business doesn't bounce back and what their options are.

I don't think there are any issues here currently, based on the limited information we have.

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Replying to Insolvency Practitioner:
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By SXGuy
26th May 2021 15:40

Thanks. Bad terminology on my part. Not an area I'm an expert in.

I gather from the replies there's not duty to report anything, however I've decided to withdraw my services as agent, purely based on the fact that my client didn't bother to consult with me first before instructing an IP. Or at the very least give me a heads up so I could cease any services I was providing.

Not bothered about the debt, I just feel more insulted that I wasn't approached first before taking action thaf will end up costing him more than he realises.

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Replying to SXGuy:
Lisa Thomas
By Lisa Thomas
26th May 2021 16:28

I hear of this happening quite a lot, sometimes it's because Directors are too embarrassed to discuss it with their accountants, especially if there is a debt owed. Other times it is simply because they do their own research to understand they need to consult an IP and it doesn't occur to them to ask their accountant for a recommendation.

Do you know whether the client has actually instructed an IP? The fee may simply be for advice.

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Replying to Insolvency Practitioner:
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By SXGuy
26th May 2021 16:51

Yes he has, I've had the proof of debt forms through and the costings of their fees. Pretty high tbh, more than any company debts so no chance of anyone receiving anything if there's anything left which i doubt. It's hard to speculate as I've not seen any bank transactions for over 18 months.

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