A TAX debt of £600,000 found after an investigation by accountants led to the collapse of one of Scotland’s oldest pub operators.
Administrators were appointed to Maclay Group, which has been in business since 1830 and owns 15 sites, including the Southsider in Edinburgh and the Three Judges in Glasgow, in January.
Although the underlying pubs business had been profitable, the company had found itself unable to meet a shortfall in funding requirements, according to a progress report for creditors from administrators at EY.
The document said that during a period of absence by a senior manager, the directors had identified an “unexpected funding requirement” of up to £1.2 million which exceeded the group’s existing £500,000 overdraft facility.
The company brought in accountants to investigate the cause of the funding shortfall and it was found that the main issue was an unanticipated tax liability of £600,000 plus interest and penalties due to under-declared VAT built up over a year. The total arrears due to HMRC by the group were estimated to be £1.9m.
Although the pub group’s underlying business was profitable, there were insufficient funds to pay the liability in full. Negotiations with HMRC over a repayment plan proved unsuccessful and, given the scale of funding required, the shareholders of the company were unwilling to provide an equity injection and administrators were called in.
A handful of staff were made redundant but at the time of the report some 280 were still employed and the administrators said no further job losses were anticipated as the pubs were continuing to trade.
The group owned 15 pubs which are now being marketed for sale with guide prices for the properties totalling around £11.7m with individual prices ranging from £175,000 to £1.35m.
The administrators said that interest in the pubs had been encouraging, with more than 50 expressions of interest either for the whole portfolio, smaller portfolios or individual units. A closing date for offers has been set at 30 April.
Other pubs the group operated include the Bank and Lansdowne Bar in Glasgow; the Tullie Inn, Balloch; Braes, Dundee; East Port Bar, Dunfermline; and The Rule in St Andrews.
The group owed around £10m to its bankers which was secured by a floating charge over assets. The sale of the pubs is expected to be able to repay most of that money.
Other creditors are thought to be owed around £5.3m. Although the outcome of the administration remains uncertain, it is thought that there may be sufficient funds to enable unsecured creditors to get some return.
The Maclay operation went into administration on the same day that the Campaign for Real Ale (Camra) said more needed to be done to save pubs from closing after new figures showed that 29 were shutting every week across the UK.
Maclay Inns, which has only belonged to three families during its history, was founded by James Maclay in Alloa in 1830. In 1870 he built the Thistle Brewery, which remained Maclay’s headquarters until early 2001 when brewing ceased and the company refocused on its portfolio of pubs.