How does a Dormant Company receive £9,000 in European Grant Funding?
How does a dormant company receive nearly nine thousand pounds in European grant funding and not declare it in its company’s accounts?
Tomorrow at the first Cabinet meeting under the new administration, they’ll meet to discuss Report Number C/23/01.
This report sets out the performance, achievements and closure arrangements for the Folkestone Community Works Community-Led Local Development (CLLD) programme which will end 30 June 2023. The council has been the accountable body for this European-funded programme since 2017.
What is the CLLD Programme
The Community Led Local Development (CLLD) is a new way of supporting local development projects using structural funds from Europe.
It aims to increase employment and skills and social enterprise and ensures that local people are involved in developing projects, using resources in the area to address local challenges.
The programmer, according to the Folkestone Work website, ran from 2018 to 2022 and was managed by the Council. A Local Action Group made up of local business and community leaders considered and made recommendations on which projects are funded. The Terms of reference can be found here and the people who sat on the Local Action Group in 2021 can be found here
- Helping people into work
- Supporting local businesses including provision of business space
- Improve access to services for businesses and residents
Back to the Report
Embedded in the report are two companies who received nearly £16,000 from the CLLD programme. They are:
SME049 Spice Queen £8,791
SME050 Kai’s Food Ltd* £7,087 (* Grant awarded but not taken up so excluded
from total )
When one looks at Companies House, both these companies have filed accounts for a dormant company for the year in question that being 2021/22.
According to the Council’s purchase orders (PO) data, shows two POs to the value of £15,878 (net) .
This eventual payment of £8,791 to Spice Queen Limited, a dormant company, had to be included in its accounts for 2021/22. Yet according to Companies House the sum of £8,791, was not included in its accounts.
Grants are treated as taxable income and have to be declared in any companies accounts, to ensure payment of corporation tax.
According to the Companies Act 2006, and Company Law, dormant companies cannot spend or receive any money, otherwise they become active for Corporation Tax. Even the smallest entry or transaction, including earning interest or paying bank charges and fees, forfeits the company’s dormant trading status. As these companies have been paid (albeit Kai’s Food Ltd did not take up the offer) one company was required to prepare full annual accounts for Companies House. This did not happen in the case of Spice Queen Limited.
The Director’s of Spice Queen Ltd are Kayrul Islam Meah and Rejia Miah both of who reside in Hythe (Kent). There are three person who have significant control; of the company, according to Companies House
Will the new cabinet members ask questions of those responsible for administering the funds, and how a company came to receive European funding, but did not comply with either the Companies Act or Company law?
Is this another financial irregularity?
We’ll leave you to make your mind up on that.
The Shepway Vox Team
Dissent is NOT a Crime
Hythe Against Crime also claims to be dormant despite their bank balance suddenly dropping. The issue of how to publish a company’s accounts resides with the company, not the grant-making body.
Ah yes what you say is true. However, the Council have three companies Oportunitas Ltd, Otterpool Park LLP and Otterpool Park Development Company. The Council’s lawyers, and monitoring officer, would presumably understand the Companies Act & Company Law!!! Or is that a stretch of the imagination too far? They would and know, yes know, that money could not be given to a dormant company as they by virtue of s1169 of the Companies Act, which makes it clear a dormant company cannot spend or receive any money.
As regards Hythe Against Crime, interesting, very interesting indeed.
This I suggest is rife around council’s in the UK so no one in govt checks this? No one in the local authority checks this? So I say a negligent council officer didn’t check what vox has checked. What about HMRC total negligence and abuse of financial regulations it’s scandalous. We need a FHDC officer or councillor to say “THIS WILL NOT BE ALLOWED TO HAPPEN AGAIN”!
There is a fundamental misunderstanding here about the nature of purchase orders. A purchase order is not a record of payment. A purchase order indicates a commitment to pay a future invoice under certain conditions. In the case of Folkestone Community Works small business grants, the invoice itself has to be accompanied by evidence that the expenditure has already been made, ie. the grant has to be claimed retrospectively. The purchase order is evidence that FHDC has agreed to make the payment of the grant on receipt of an invoice and the required supporting evidence within a stated timeframe and states the maximum amount that can be reclaimed but it is not evidence of (or the date of) a payment.
As the article says, one of these two companies has not taken up its grant offer, ie. in spite of its application being approved, it has never received a penny of the grant. The other company did receive payment but, as you might have concluded from its published accounts, this was after the end of the 2021-22 financial year.
As someone who has been a member of the Local Action Group overseeing Folkestone Community Works and, more recently, the Local Action Group chair, I can assure you that council officers have rigorously scrutinised all applicants and their adherence to the grant conditions and reported on this to us. For the avoidance of doubt, I am not employed by the council and am totally independent of it, and I have received no payment for doing this role.
So for anyone wondering about whether there was a financial irregularity in 2021-22, the answer is No – instead there seems to have been a misunderstanding of council documentation by the author of this article.
According to my bank statement I received the sum of £8,791, in Feb 2022, so this sum should have shown up the accounts for 2021/22. This was an oversight on my part. Matters are in hand to amend this.
Kayrul, who did you receive that payment from? I think you will find that it wasn’t from FHDC.