A groundworks, civils and plant-hire firm has been sold to a connected company after being hit with a winding-up order by HMRC for a £4.3m tax bill.
Cheshire-based TPS Plant & Groundwork was sold for £390,000 to TPS Civil Engineering & Plant Hire. Both companies are owned by Phillip Skyrme.
A newly published report by administrators from Dow Schofield Watts Business Recovery said that TPS traded profitably up to the Covid pandemic but then fell into arrears with tax payments.
The firm posted an operating profit of £532,000 from turnover of £6.7m in its most recent full-year accounts for the year ending 31 March 2023, the administrators said.
In the summer of 2023, HMRC notified the company of a potential additional VAT liability arising from an investigation into missing trader fraud, the administrators added.
The company disputed the move, which increased its VAT liability by more than £2m.
In October 2023, TPS began negotiations with the tax body in a bid to secure an agreement that would spread payments over two years.
“However, negotiations became protracted when the company failed to pay current tax liabilities by the due dates, instead paying ad hoc lump sum payments on account,” the administrators said.
In June 2024, HMRC said it would only accept a proposal for payment in full over 12 months with a significant upfront payment.
The company did not consider this a viable option and broke off negotiations, Dow Schofield Watts added.
HMRC then issued a winding-up petition against TPS in August 2024 over a tax liability totalling £4.3m.
Ahead of a court hearing in January 2025, the firm sought a buyer, with director Phillip Skyrme ultimately offering £390,000 the following month.
A report in February by independent evaluators Pivotal concluded that the sale enabled a realisation of goodwill and intellectual property that might otherwise not be available if the company had stopped trading.
The sale also includes the transfer of book debts and retentions, which would not be realisable otherwise, Pivotal added.
The company’s nine employees were transferred to TPS Civil Engineering & Plant Hire under TUPE regulations, meaning they are not owed any money as a result of the administration.
HMRC is likely to be paid around £353,000 of the £4.3m it is owed, according to initial estimates by Dow Schofield Watts.
The Pivotal report noted: “It is anticipated that HMRC will be the primary beneficiary of the proceeds of the consideration payable under the sale agreement, in addition to other realisations in the administration, and has been apprised of the situation throughout.”
It added that HMRC has not objected to the terms of the sale.
The administrators’ initial estimate is that £40,000 was owed to nine trade and expense creditors. None of this is expected to be paid back.