# Company trading without paying VAT/PRSI/PAYE



## Bronte (25 Jan 2010)

How can people run a third company (two previous one's failed) and pay no VAT or PRSI or Paye for a long time and still be allowed to run the business.  Does revenue not keep an eye on such people and do they not prosecute them for such carry on?

Also in relation to corporate enforcement surely such people should be barred from being directors.


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## Brendan Burgess (25 Jan 2010)

As far as I know, if a company goes into liquidation with unpaid creditors, the liquidator must apply to the court to restrict them. But the court makes the final decision. In most cases, they don't restrict them.

The Revenue has a problem in that it must allocate its resources where it can best get a return on them. I suspect that they go after the easiest targets where they know they will get a payment. In principle, they go after everyone who defaults, but in practice, they can't. In the case of the Residence, they got an attachment order on the bank account so that they would get any income received. I was told that the reason they went after the Residence is that the guys applied for a VAT refund. So when Revenue went to assess the VAT refund, they found that there had been no payments of VAT or PAYE and then went after them.


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## Bronte (25 Jan 2010)

That's riduculous that one would make a VAT reclaim where these was no VAT paid.  Is that not an offence?  I never heard any mention of the VAT reclaim in the media.


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## jack2009 (25 Jan 2010)

Brendan said:


> As far as I know, if a company goes into liquidation with unpaid creditors, the liquidator must apply to the court to restrict them. But the court makes the final decision. In most cases, they don't restrict them.
> .


 
If a company goes into liquidation the Liquidator must report to the ODCE within 6 months of appointment and advise the ODCE if the directors acted honestly and responsibly.  If the liquidator says that they did act honestly and responsibly and the ODCE agree then there is no High Court application.  However, if the directors did not act honestly and responsibly then it goes to the High Court under section 150 CA's for the Judge to decide.

The problem is that the liquidator and ODCE etc are only looking at the actions of the directors of this particular company.  If however, the directors have a history of such carry on it demonstrates that the directors are not acting honestly and responsibly and therefore should be restricted.


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## Setanta12 (26 Jan 2010)

Bronte said:


> That's riduculous that one would make a VAT reclaim where these was no VAT paid. Is that not an offence?


 
No, absolutely not. Any start-up would incur a large amount of expenses starting-up e.g. fixed assets and stock, which all mean VAT charged by the sellers - how else would a business recoup VAT on expenses ?


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## jack2009 (26 Jan 2010)

Setanta12 said:


> No, absolutely not. Any start-up would incur a large amount of expenses starting-up e.g. fixed assets and stock, which all mean VAT charged by the sellers - how else would a business recoup VAT on expenses ?


 
I think what Bronte is commenting on is different, it is when a business only submits a VAT return when there is a refund due and ignore making VAT payments.


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## Bronte (26 Jan 2010)

Yes I didn't think about the fact that one would be paying VAT for purchasing items.  

Brendan said they didn't pay VAT and went looking for a refund of non paid VAT that's what I was thinking of.

In relation to Liquidation, so in 6 months the liquidator has to make a report.  Why is there no link to the way people ran other companies?

Incidentally I have nothing against entrepreneurs or business being started and failing, it's just I don't understand how you can borrow vast sums with apparently no assets, never ever make even a euro profit, in fact from day one weekly run a large loss despite a large income stream, pay no VAT or employees PRSI & PAYE and purchase for oneself a fine car (250K apparently) and go into court and try and continue and believe that going forward (in the worst recession since I don't know when) that one can trade out of one's difficulties and to give an interview in a newspaper and not see anything wrong with that kind of carry on.  

The fact that it's 3 companies should ring alarm bells in oneself surely.  Do these people not have the best of experts and accountants etc to advise them?  It's not like the situation of a single individual starting up the local corner shop or beauticians.


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## davidoco (26 Jan 2010)

These types of companies would be referred to as Phoenix cases.  Once established in Revenue that a company may be a Phoenix company they will mark out the directors for special attention on any future companies.

There is a memo of understanding between Revenue and the ODCE on this.  Note that it mentions write offs in excess of €100,000  !!!




Phoenix-type cases:  

The ODCE is interested in receiving good quality information .............................The ODCE is particularly interested in receiving notice of individual cases with debts exceeding €100,000 or cases involving serial ‘strike-offs’ with outstanding debts.


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## jack2009 (26 Jan 2010)

Also, suppliers do not have to supply goods to creditors who have a "history" and they should therefore carry out director searches etc. before supplying goods on credit.


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## Liquidator (12 Mar 2010)

Any astute suppliers will have 'retention of Title' on goods supplied. This is effectively a sale or return agreement which will minimise their loses in the event of insolvency.

As for restrictions, liquidators right a report to the ODCE, with suggestions that are not always followed. This will not always be calling for restriction as a lot of companies become insolvent through no fault of the directors i.e. if they have been victims of bad debt.

One consideration of the ODCE is what they call phoenix syndrome. (serial liquidators).  These directors are far more likely to be restricted


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## jack2009 (12 Mar 2010)

Liquidator said:


> Any astute suppliers will have 'retention of Title' on goods supplied. This is effectively a sale or return agreement which will minimise their loses in the event of insolvency.


 
ROT is not enough, you need to keep tight credit control!

[/QUOTE]As for restrictions, liquidators right a report to the ODCE, with suggestions that are not always followed. This will not always be calling for restriction as a lot of companies become insolvent through no fault of the directors i.e. if they have been victims of bad debt.[/QUOTE]

In my experience a very very high percentage of what the liquidator suggests with regard to restriction is followed by the ODCE!

Provided directors act honestly and responsibly they have nothing to fear of the Liquidator or the ODCE.


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