As the Guardian reported over the weekend:
A multimillionaire MP who enjoys a Downton Abbey lifestyle funded by historical family links to the slave trade has failed to publish accounts for four of his five companies since 2009, in potential breach of company law.
The Observer and Sunday Mirror revealed in December that Richard Drax was worth an estimated £150m, but had not declared ownership of a Barbados sugar plantation in his register of members’ interests declaration.
Now Drax, the Conservative MP for South Dorset, is having to produce more than a decade’s worth of missing accounts, which reveal hundreds of thousands of pounds of business transactions.
I could have left aside the Downton Abbey references, whether true or not. I could have ignored the sugar plantation on this occasion, except it shows that there might be a history of non-disclosure. What does interest me is that he blamed his accountant. And what also interests me is that such a persistent failing in company accounts filing was possible. To explain its extent it is necessary to quote the Guardian again:
Four of the companies had not provided any accounts in the last decade. As both of his unlimited companies were subsidiaries of a limited company, under section 448 of the Companies Act 2006 they all should have submitted accounts annually.
Concerns about a section 448 breach were raised with Companies House in late January. Over the last two weeks, some 50 documents from the four companies have appeared on the Companies House website, including a decade’s worth of missing accounts.
Two limited companies, said to have been dormant from 2009, are now shown to have been active. The unlimited companies have now filed accounts, showing in some years hundreds of thousands of pounds’ worth of financial activity. All had been approved by Drax annually as late as November 2020.
First, there would appear to be serious offences implicit in these disclosures. Representing that a company is dormant when it is not matters. And it might represent an offence. Accounts were presented that did not represent a true and fair view of the company’s affairs. Prima facie that means that there is at least a case to answer.
The same is true with the unlimited companies. These are not one off errors. They are persistent failures to file.
But what matters are not the consequences for Drax (for whom blaming the accountant is not a defence) or the accountant (who may have professional indemnity insurance issues to worry about) but what this says about our UK company law system.
The UK has no company law regulator. Companies House is a registrar, not a regulator. It can prosecute, but does so rarely and usually for minor offences. Recent government proposals will not much change that. No one in the UK, including HMRC and Companies House, goes out to look for abuse of company law. And that is a massive failing.
I have long suggested that if we wanted to locate the shadow economy in the UK it is easy to do. Just look at all the claimed dormant companies that no one pays any attention to, and also look at the 400,000 or more companies a year that disappear without trace with no questions asked of them in almost any case, and you will find the shadow economy. It exists in plain sight, trading using licenced identities that are wholly unregulated and from whom no legal compliance of any firm is demanded, and so none is supplied.
It is as if the government wants to facilitate fraud and corruption.
Richard Drax appears (I stress, appears) to have shown how easy it is for a trading company to file dormant accounts without question being asked. The real question is how many others are doing that? I suspect it is at the very least many tens of thousands. It could be a great many more. And literally no one can say I am wrong because no one has ever done any work to find out.
The consequence is threefold. One is rampant criminality.
The second is that honest traders are undermined.
The third is a tax gap much higher than HMRC admit to.
And apparently no one in government cares.