A criminal law firm was forced to close shortly after an £80,000 bill had been rejected by the Legal Aid Agency, insolvency documents have revealed.
A statement of administrator’s proposals showed Kent firm BKRW Limited, was also experiencing cashflow problems because of the time the LAA took to pay it.
The business was owed more than £300,000 by the LAA in October 2013 when it was faced with a tax bill of £210,000 following a petition by HM Revenue & Customs.
The statement, published by Companies House this week, said that the firm continued to struggle to meet its tax obligations at the start of this year.
It added: ‘To make matters worse a bill of approximately £80,000 was rejected by the LAA on one of the company’s larger cases. Whilst an appeal has been lodged by the company this had a significant impact on the cashflow.’
By May this year, the firm had instructed accountants to negotiate with HMRC, and subsequently took insolvency advice. It was placed into administration on 28 July.
By the time of administration, the statement revealed that pre-appointment invoices for county and magistrates’ court work are likely to amount to £300,000.
To date, around £55,000 has been raised from book debts and almost £40,000 held in the bank.
Unsecured creditors’ claims are estimated to amount to £446,480, of which HMRC is owed around £380,000 in corporation tax, VAT and PAYE.
The next biggest creditor is Six Pump Court chambers, which is owed almost £11,000.
Administrator Insolve Plus said placing the company into administration was considered the best course of action as it provided a ‘controlled mechanism’ for looking after clients and avoiding intervention by the Solicitors Regulation Authority.
A meeting of creditors is scheduled for next week in central London.
The firm incorporated in February 2004, with the current name referring to the merger of four entities in 2007. At one time it had offices in Ashord, Dover and Folkestone, but only the Folkestone office was operational at the time of closure.
Since the administration, almost £20,000 has been accrued in fees and expenses, with Insolve Plus paid £11,215, accountancy firm Finerty Brice £4,300 and law firm Devonshires Solicitors £4,090.
A Legal Aid Agency spokesperson said: 'We have procedures in place to help firms which run into financial difficulties, including a dedicated hardship process. However, we rely on firms to file their bills in a timely manner. We have dedicated contract managers who can help with this process.
'The administrators' report shows this firm owes more than £380,000 to HMRC.'