The Faversham News reported yesterday, Thursday 20 September, that the tax bill of £36,782 against Brogdale Orchards Ltd, a subsidiary of the Brogdale Horticultural Trust, which resulted in a Country Court Judgement for failure to pay, had now been paid. The reason that Brogdale Orchards received a County Court Judgement was because of ‘staff shortage’ said the Trust’s Chief Executive, who went on to explain that ‘We got behind and didn’t send off the cheque in time. We are all human. One of our girls is on long term sick and there is a backlog of work.’
How could Brogdale Orchards have overlooked a substantial bill due to a creditor such as HM Revenue & Customs? Anyone who has been pursued by HM Revenue & Customs knows that one has many opportunities for paying one’s taxes before a County Court Judgement is issued.
What was said to the Faversham News is hardly an adequate explanation. At the commencement of this saga, the £36,762 in taxes due to HM Revenue and Customs was not paid by Brogdale Orchards Ltd when originally due for payment. Even when demands for payment were made payment was not made. Not even when the County Court Claim was received were the taxes paid. Brogdale Orchards had 28 days to pay the Judgement debt before a County Court Judgement was entered onto the County Court Judgement Register. Even then the company did not pay its taxes on time.
If these unpaid taxes related to VAT, National Insurance and PAYE then Brogdale Orchards ought to have recovered the VAT, National Insurance and PAYE from its customers in respect of goods and services. This ought to mean that it had the money to pay HM Revenue & Customs when it was originally due for payment.
The Trust’s comments in the Faversham News perhaps gave more insight into those responsible for managing Brogdale Horticultural Trust and Brogdale Orchards than the efficiency of their staff. One would have thought, in the first place, that a responsible director or officer would ensure that HM Revenue & Customs were paid their £36,762 and obtain confirmation that the debt had been paid prior to the County Court Hearing so as to avoid a County Court Judgement.
Secondly, the failure to pay the taxes due indicates a long term and continuous failure to pay spread over a considerable period. This was no one-off event. What did the directors and officers do when each demand for payment came in? Certainly nothing was done to pay the taxes owing until it was too late. Did their much reported, financial internal controls and risk management systems fail or was there some other reason why the taxes remained unpaid? Are these not misjudgements and did other creditors not get paid in order to settle the tax bill? A charity that has received hundreds of thousands of pounds of public money and its 100% owned subsidiary should do better.
Given the magnitude of the debt, £36,762, one is not inclined to believe it was simply overlooked or not paid as a result of an administrative problem. The underlying factor was probably Brogdale Orchards cash-flow and solvency.
If one looks at three well known insolvency indicators, then how does Brogdale Orchards fare?
• Balance sheet liabilities exceed balance sheet assets.
Based on its 2006 audited accounts Brogdale Orchards liabilities exceeded its assets by £216,581. Brogdale Orchard 2006 Balance Sheet
• Can the company pay its debts when they fall due for payment?
Clearly the two County Court Judgements prove that not only did it not pay the debts when due but did not pay the debt at any stage up to and including the County Court Hearing. Key questions are how many bills are paid late and on average how many days late were those bills.
• The fact that creditors have obtained County Court Judgements may be indicative of the company’s insolvency.
At the very least it provides evidence of the attitude that is adopted towards paying creditors even when the Courts are involved.
Brogdale Orchards is apparently continuing to trade, but is it likely that it will cover its costs and make some money? In February 2007 the Trust’s Chairman wrote about the loss of the restaurant, shop and plant centre at Brogdale and that it would struggle to make ends meet. In 2006 Brogdale Orchards recorded a loss of £(26,627) even with the restaurant, shop and plant centre in operation. Can 2007 turn in a profit against such a background?
Brogdale Horticultural Trust, the parent company, and the directors and officers of Brogdale Orchards must be addressing the issue of cash flow and solvency. But what can be done? Maintaining the status quo no longer seems a viable option. Brogdale Orchards needs an injection of money to return the balance sheet to a solvent position. Other options could include selling the company, but who would buy, or winding up the company either voluntarily or compulsorily. There are surely hard decisions to be made in the coming months.
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