Closed down firms leave a trail of debt
Council is forced to write off more than £500k
Defunct businesses across West Dunbartonshire have left a trail of debt, owing more than half a million pounds to the public purse.
The council last week wrote off £535,646 in unpaid business rates, the total amassed by firms across the area who have either dissolved or gone into liquidation.
Juice bars, car garages, furniture shops and clothes stores racked up the enormous debts — including one which was in the red by almost £50,000.
Councillors on West Dunbartonshire Council’s corporate services committee agreed to write off the National Non Domestic Rates (NNDR), some of which date back to 1993, after they deemed them irrecoverable at a meeting last week.
But members said more must be done to chase companies, which are depriving the public of large sums of money which could be otherwise spent on key local services.
Chair of the committee Kath Ryall said: “These amounts are substantial. When we look at this in detail the background is not going to surprise anybody. Unfortunately, there are clearly businesses who see the root of dissolving their company as the mechanism of avoiding paying NNDR.
“There are lots of issues. Sometimes the landlord in the property is unaware of what is going on and whoever is running the property might be subletting it out without the landlord being aware.
“The issues are really bigger than we as a council can deal with.
“These are taxes which are owed by people and they need to be paid in order for fairness.
“It’s a lot of money but it’s a difficult problem to address.”
Businesses, which had their debts written off included Newport Hospitality Ltd, which operated in Dumbarton and owed £10,152 but has since dissolved.
Dumbarton Car Repair, which has gone into liquidation according to the council report, features prominently in the list.
The firm is said to have owed £6,241.19 in rates from 2011/12, £11,756.25 from 2012/13, is listed as owing £12,069.75 and £12,304.88 from 2013/14, and £6,681.15 from 2015/16. Xtreme Soccer in Castlegreen Street, Dumbarton, is listed as being £7,049 in the red in 2014/15 and £10,824 in 2015/16.
A company in Clydebank, TFB (Furniture) Ltd, in Sylvania Way, hiked up the most debt, sitting at almost £50,000 in the red.
Dumbarton councillor George Black questioned: “How can a company over a five-year period rack up £50,000 of debt and how can a £50,000 debt be rendered as unrecoverable?”
Councillor Ryall replied: “That company went into liquidation so at that point there’s very little that can be done.”
He also raised concerns over failed companies springing back into life under a different name, adding: “When you see a company applying under a different name under the same principle alarm bells should be ringing.”
The meeting heard that the problem is being exacerbated by the legal practice of companies going bankrupt, only for a second so-called “phoenix company” to start up overnight with the same directors, but without any obligation to pay their old company’s debts.”
Council officer Arun Menon, business support manager, agreed it was a problem which was very difficult to bring under control as failed directors may set up a new company under relatives’ names instead of using their own.
Lomond councillor Jonathan McColl questioned whether the council could introduce measures such as dishing out penalties, revoking trading licenses and requiring firms to pay domestic rates on a more frequent basis rather than annually.
Councillor John Mooney added: “UK company law seems to be extremely weak in a lot of areas.
“I would really welcome Scottish Parliament be given the opportunity to look at this.
“We have to get a lot more smart. This is detrimental to the public purse, with a debt of £50,000 racked up by one company. We don’t have the teeth to deal with that.”
Last year, the Local Government Authority called for new powers to allow councils to suspend the licences of businesses failing to pay their rates, adding that under current laws authorities cannot refuse or suspend a premises licence for an outstanding business rate debt.