FASHION CHAIN’S £1M RATES DEBT READY TO BE ‘WRITTEN OFF’
Bid to get ‘bad debt’ off books
MORE than £1 million of unpaid business rates is set to be written off at covid-hit New Look’s North Staffordshire warehouse.
The high street chain entered a company voluntary arrangement (CVA) last year after lockdown-enforced store closures resulted in the firm becoming insolvent.
New Look’s massive distribution centre in Lymedale Business Park was due to pay £1,699,840 in business rates in 2020/21, but most of this will now go unpaid due to the CVA.
The government will pay Newcastle Borough Council and Staffordshire County Council 75 per cent of the money they were owed by the company, under its covid compensation scheme.
New Look expects to eventually pay around £400,000 of the distribution centre’s business rates for the year, leaving £1.3 million of uncollectable debt. But the borough council says that it will be writing off the full amount, in order to get the ‘bad debt’ off its books.
A report detailing the New Look write-off, along with the borough council’s other irrecoverable debt, is set to be approved by cabinet members today. A borough council spokesman said: “New Look have entered into a Company Voluntary Arrangement with the Insolvency Service.
“Under these arrangements, the company usually makes a proposal to make reduced payments to its creditors and can therefore avoid bankruptcy. The council has a duty to abide by these agreements.
“It is the council’s practice to write the debt off in full and then write on dividends as and when they are received as part of the CVA, rather than keeping a bad debt on the system for a number of years.”
A CVA is a way in which an insolvent company can pay off creditors over a fixed period while continuing to trade, if creditors agree.
New Look’s CVA, which its creditors approved in September, allowed the company to avoid collapse, meaning more than 11,000 jobs were saved and no stores had to close.
A New Look spokesman said: “We are grateful to all our creditors, including our many landlords, for their support for last year’s CVA, which, alongside our financial restructuring, was absolutely necessary to provide us with enhanced financial strength and flexibility to protect the longterm future of the business.”
According to the report, £679,936 of New Look’s business rates debt is owed to the borough council, with the remainder owed to the government and the county council. The government compensation scheme would reduce this amount to £169,984, which will not be repayable by the council to the collection fund until 2022/23. The other writeoffs which members will be asked to approve are confidential, but include £156,742 of irrecoverable debt, and £295,668 of unpaid business rates.