Director of Subway franchise banned after undercover VAT sting

CHICAGO, IL - MARCH 08: In this photo illustration a sandwich and drink is seen at a Subway restaurant on March 8, 2011 in Chicago, Illinois. With 34,225 restaurants in 95 countries, Subway has surpassed McDonalds as the world's largest restaurant chain.  (Photo illustration by Scott Olson/Getty Images)

The boss of a Subway franchise has been disqualified from acting as a director over an unpaid VAT bill of almost £170,000.

Jasmina Gordhan, who ran a now-defunct business called Leatherco, which ran a Subway branch in Central London, has been banned as a company director seven years.

An investigation by the insolvency Service found that she did not deal properly with the taxation affairs of Leatherco throughout its trading, resulting in at least £169,286 being due. It also revealed found she did not ensuring adequate and complete accounting records were maintained.

The Insolvency Service said that when it looked into Leatherco, the company had not submitted any VAT returns, but had been paying artificially low assessments of VAT. This hid the true position and allowed the company to continue trading using that undeclared tax as a reservoir of working capital.

The shortfall came to light following an undercover HMRC operation that established that Leatherco had been paying 7.5% of what should have been paid.

Once the true position was clear, Ms Gordhan did not do anything to ensure that either the tax affairs were brought up to date or that any more payments were made to HMRC.

Leatherco then went in to liquidation after the business and assets were transferred, before a liquidator was appointed, to another company of which Ms Gordhan was a director.

Leatherco’s records were not delivered up, so it isn’t possible to identify the recipients of, and reasons for, £612,432 expended from the bank account; nor what happened to assets that had been valued at £87,371 in accounts to December 2012 and subsequently sold to the connected company for a purported price of £9,675.

Leatherco Limited was incorporated in November 2010 and started trading in February 2011 as a Subway franchise in central London. The business entered liquidation in September 2014.

The Statement of Affairs sworn by the director disclosed assets totalling £5,555 and liabilities totalling £21,584. The liquidator realised assets totalling £9,385 and established that the liabilities totalled at least £169,785.

Commenting on the disqualification, Cheryl Lambert, chief investigator at the Insolvency Service, said: “This is a significant ban reflecting the severity with which the Insolvency Service considers the conduct of the director. Ms Gordhan was the sole director and thereby responsible for all its activities.

“Directors of companies are required to have control of, and exercise independent oversight over, the operations and finances of the business. Given the income placed within the company bank account, which itself is incapable of being considered the full turnover and the lack of records relating to cash sales, no competent, active and alert director could have concluded that the amounts of VAT assessed were reasonable and accurate.

“Ms Gordhan’s conduct of Leatherco’s affairs fell short of the standards of competence and integrity expected and to protect the integrity of the Market, the Insolvency Service will use its powers to protect the business world when director’s act in this way.”

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