One of my clients ceased trading in July, after the landlord gave notice to quit immediately. She had one employee who was entitled to redundancy, and was unable to pay her it.
The employee has to make a claim for redundancy with the insolvency service, but first they have to take it to an employment tribunal. Does the employee have to go through ACAS first for early conciliation (which to me would be a waste of time) or can they go straight to tribunal.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
It's a sole trader and the business has ceased trading, but no one appointed. A liquidator would be out of the question but I don't know how else she would go about finalising it, other than bankruptcy.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Hi John My understanding and it would need double checking is that the claim from the employee would be against the sole trader personally because ceasing trading is unfortunately not the same as the business being insolvent, so I think she needs to crystallise her position by going down the bankruptcy route. Not sure if the creditors voluntary arrangement counts in this instance. Although there may be a case of if she can prove the business cannot afford the payments that might be sufficient? Sorry Im only summising, no actual experience.
Best place to get advice for the employer is perhaps an insolvency practitioner. But it might also be worth her making a quick call to ACAS. I think if this was one of mine, I would be tempted to point her in the direction of both, plus possibly maybe the insolvency service as well and not comment any further TBH. Have you raised this on AWeb? (Not been over there for a while as just too busy! If so - let us know what they think).
-- Edited by Cheshire on Friday 15th of September 2017 08:17:15 PM
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
You can only go bankrupt if you have debts of £5k or more (changed last year) This will be the only debt other than a few hundred to PAYE, and wouldn't reach the 5k threshold.
I haven't raised it on aweb, but that's a good idea.
Changed my mind and have asked on an employment forum instead, as the question isn't really accountancy related. There's a couple of good employment law specialists on there
-- Edited by Leger on Saturday 16th of September 2017 11:20:29 AM
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Hi John
At a guess then the employee does have the right to 'sue' her for the redundancy which is probably why it goes via the tribunal route. At the end of the day the employee and any 3rd party looking in doesnt know this business is insolvent, just not paying its debts.
When you do the books to cessation is there any scope for claiming tax relief for losses/overlap relief that would provide some cash for her to pay the debts?
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
If the business was a sole trader then that sole trader is personally liable to pay any debts regardless of whether there is any money in the business or not. So yes, in my opinion the ex employee should at least offer to go through ACAS (if the employer refuses then at least they can be seen to have tried to do the right thing.) I personally don't think it will be a waste of time as once the ex employer realises their legal responsibilities and that their personal assets are not protected by them being a limited company they may realise that they are not going to get away with this.
That's harsh if you don't mind me saying so Julie.
The sole trader is not in a position to repay this debt otherwise it would already have been paid. Employee spoke to Insolvency Service who said it had to go to tribunal in order them to look at paying the redundancy pay. I will let the employee know (trying to do the best for both as I appreciate the employee is entitled to payment) that their first port of call is ACAS.
Hi Joanne
I don't think that there will be any tax saving. 3 months trading 15/16 small loss and full year 16/17 may be a small profit (I have books done up to January 2017) traded to end of July 2017. Hopefully I will have the remaining paperwork in November (told her that's the latest I need in order to file 16/17 at least)
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
I don't think I'm being harsh. I've been a sole trader in the past of a business that towards the end due to personal reasons (family illness) was losing money so I do have sympathies (all my debts were paid from personal monies.)The sole trader is personally liable for all debts so unless they have absolutely no personal assets at all then whether its harsh or not they are liable. If that is the case and they truly have no assets then it would be up to the insolvency service to recover the payment from the sole traders assets or come to a repayment arrangement.
I think this is a more specialist area so I would advise the ex employee to take advice from ACAS or an employment specialist. I would also suggest the ex employer contacts them. This is what the ACAS website says
If I am closing my business, will the Government pay statutory payments to my employees?
Provided that the employees would have been entitled to statutory payments such as redundancy pay, notice pay, arrears of wages and outstanding holiday pay, the National Insurance fund can make statutory payments if your business is unable to. However, this is in very specific circumstances only and can be a complex area. To find out more about redundancies if your business is insolvent or closing, contact the Redundancy Payments Service Helpline (currently managed by Acas) on 0845 145 0004.
and on another page
If you have cash-flow problems so serious that making the redundancy payment would put the future of your business at serious risk, the Redundancy Payments Service (RPS) can arrange to pay the employee direct from the National Insurance Fund. If you are insolvent, the RPS makes the payment and the debt is recovered from the assets of your business.
-- Edited by pictures on Monday 18th of September 2017 02:07:27 PM
I did post a reply to this but just realised I'd not sent it, but the good news is that they've come to a mutual agreement, and both employee and employer are happy.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
