A Welsh law firm was forced to seek insolvency advice after a disputed £168,000 debt to HM Revenue & Customs, new documents have revealed.
An administrators’ progress report filed with Companies House revealed that Morgans Select Limited, set up by Roy Morgan, a prominent figure in the Welsh legal community, had been struggling since September 2013 because of falling turnover and clients delaying payment of fees.
This had a knock-on effect on the company’s ability to pay suppliers and HMRC.
In addition, a further problem was caused by what the report calls an ‘historical error’ with PAYE and VAT records that created the £168,000 debt.
The firm had operated as part of a group, with all payments managed by Morgan Facilities (MFL).
The report stated that MFL passed monies to HMRC but one of the parties ‘misallocated’ the funds. MFL is now in liquidation and HMRC said it has not received payment.
While Morgans Select sought legal advice, HMRC threatened enforcement proceedings and the firm had to seek professional insolvency advice.
The firm, which practised in family, probate and conveyancing, was placed into administration last April and the business continued to trade while administrators sought a transfer of live cases.
However, no firms were prepared to take on the conveyancing caseload and the firm ceased trading in July.
The company had employed 12 staff and had three directors who were practising lawyers. Five staff were made redundant in April 2014 and seven were retained while the business wound down. The litigation and family solicitors employed at the practice found work elsewhere and most clients were offered to take their cases with them.
The report, prepared by Bristol-based Undebt.co.uk and Benedict Mackenzie Recovery Ltd, said the company was found to have a total value of work in progress, disbursements and VAT estimated to be almost £100,000.
At the time of administration, total claims to creditors were estimated at around £285,000, including the HMRC debt. It is still unclear how much will be repaid.