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HMRC investigating Lloydspharmacy over possible £33m locum tax bill

HMRC is looking into a potential £33 million owed to it by the now-defunct multiple, Lloydspharmacy’s liquidators have revealed.

The HMRC is investigating whether Lloydspharmacy owes it £33m. 

In January, the Company Chemists’ Association (CCA) revealed that its members were quarrelling with the UK tax authority over an estimated £550 million retrospective clawback over the employment of locums.

The HMRC is seeking to retrospectively “claw back” income tax and national insurance contributions from pharmacies that treated locums as self-employed, after an update to its guidance on tax rules.

Now, a report from Lloydspharmacy liquidators Turpin Barker Armstrong (TBA) has revealed that HMRC has “raised an enquiry” into the employment status of locums at the former multiple.

Read more: Locum tax clawback leaves ‘most’ CCA multiples in dispute with HMRC

HMRC issued a notice “shortly prior” to the liquidation of Lloydspharmacy - now known as Diamond DCO Two Limited - that “determined” Lloydspharmacy owed £33,507,634 in outstanding PAYE tax regarding locums, according to the report published last week (March 7) and seen by C+D.

TBA senior partner Martin Armstrong, who issued the report, said that accounting firm KPMG has appealed the claim, after being hired by Lloydspharmacy and retained by TBA to “dispute that any sums are owing”.

Mr Armstrong added that HMRC postponed its tax claim “pending the outcome of the enquiry”.

Read more: Explained: HMRC withdraws locum-specific tax guidance

He said that a “nominal figure of £1” had been assigned to the claim while the enquiry was ongoing and that there would be “funds available to pay a dividend” if the claim is successful, but that he was “unable to confirm” the amount.

HMRC is considered a “secondary preferential creditor” and will be paid after preferential debts are settled and before non-preferential unsecured debts, the report said.

An HMRC spokesperson said it has been “both fair and pragmatic” in its approach to the locum pharmacist tax matter, adding that the “tax which is due under the law” goes to funding “vital public services” and creating “a level playing field”.


£7m payment for liquidators


The report also revealed that TBA will ask Lloydspharmacy’s creditors to approve nearly £4m in remuneration in a meeting on March 22.

This is made up of a fixed fee of £2.875m plus £1.1m in estimated time costs for dealing with the liquidation, it said.

Mr Armstrong said that the fee, which he admitted was “larger than TBA would normally charge”, was justified by the case being “significantly more complex than an average case”.

Read more: Pharmacy 'repossessed' after Lloydspharmacy lease fiasco

In addition, Mr Armstrong also estimated that his “total expenses” in relation to the case would be £3.2m. 

And he said that he would ask for a payment of £100,000 “plus expenses plus VAT” for TBA’s “pre-appointment fees” at the March 22 creditors’ meeting.

Read more: ‘No realistic prospect’ of proper payout in Lloydspharmacy redundancy row

The creditor’s report also said that Aurelius Crocodile Limited - one of a chain of companies that formerly held Lloydspharmacy - is owed £50,000,000 “albeit this is subject to legal advice”.

The overall return to Aurelius is estimated at 58.96p in the pound, while unsecured creditors are expected to receive 0.27p for each pound owed, it added.


Three-month extension on director’s report


Meanwhile, Mr Armstrong said that the secretary of state had agreed that TBA could have a three-month extension to submit its report on the conduct of Lloydspharmacy’s directors. 

He added that the directors’ conduct report, which is a “statutory obligation”, required more time to complete “due to the complexities of the case”.

Read more: Lloydspharmacy goes into liquidation with £293m owed to creditors

And Mr Armstrong said that the liquidators’ own investigation would examine the disposals of Lloydspharmacy’s branches and include an “an analysis of the funds” between the former multiple and the group of companies once owned by its parent company.

A spokesperson for Aurelius declined to comment. C+D also approached Hallo Healthcare for comment.


Lloydspharmacy latest


Last month, the Pharmacists’ Defence Association (PDA) warned that there was “no realistic prospect” of a decent payout for former Lloydspharmacy employees who worked in Sainsbury's stores, even if they were to win their ongoing redundancy dispute in court. 

And C+D reported that an Ashton-under-Lyne pharmacy was unable to open for four days when bailiffs broke in overnight and changed the locks, after it was “caught up” in the liquidation of Lloydspharmacy.

Read more: ‘Historically significant’: All the reaction to Lloydspharmacy’s high street exit

McKeevers Chemist’s managing director Paul McKeever told C+D at the time that he believed the multiple wasn’t “fulfilling [its] obligations on the lease or [wasn’t] paying the rent…and we got caught up in all of that”.

And in January, C+D revealed that some 514 companies and people were owed a total of £293 million by Lloydspharmacy, according to documents filed by its liquidators in Companies House.

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