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DJM - Statement of Affairs released

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Can you please keep posts on topic. Off-topic content is being removed.

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Could he pawn his PM’s cup for modelling to pay off things ? 

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16 minutes ago, TheSignalEngineer said:

About 30 years ago I dabbled in secondhand records, books, etc but I was hardly making a profit from doing it in my non-dayjob hours. It wasn't just the time taken in selling, mostly at fairs with a bit of mail order, but getting and checking stock, lugging the stuff backwards and forwards, etc.

I recently found my old cash book from the venture and it showed I was right not to continue as in two years I had barely made a profit other than my stock, most of which ended up being sold a car boot and raising a couple of hundred pounds. At least a few of the items I didn't sell off cheap made a bit on Ebay in later years.

 

I find that it's reasonably easy to make a profit, it's making a living that's a bit more complicated...

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On record keeping, the liquidator might be restricted in his powers to compel disclosure but HMRC has clear rules and there can be heavy fines for not retaining records for the relevant period.  The rules vary by type of tax but for Corporation Tax it is six years after the end of the tax year.  HMRC will receive a copy of the report, as a creditor, and decide whether to take action if the liquidator has been unable to obtain figures.  As far as I know, this would not normally become public unless it ends up in court which could take years. 

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1 hour ago, two tone green said:

Could he pawn his PM’s cup for modelling to pay off things ? 

 

He could.

 

Imagine please the inside of a pawnbrokers.

 

Pawnbroker:  Good afternoon, how can I help you?

 

DJ:  How much would you give me for this please (hands over the cup)?

 

PB:  Hmmm, £50

 

DJ:  Sounds OK

 

PB:  There's a catch

 

DJ:  Go on

 

PB:  I charge for storage

 

DJ:  How much?

 

PB:  £49 per item

 

DJ:  So you'd give me £1?

 

PB:  Yes

 

DJ:  OK because that's more than I'd get for it on a well known auction website

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18 minutes ago, wasabi said:

On record keeping, the liquidator might be restricted in his powers to compel disclosure but HMRC has clear rules and there can be heavy fines for not retaining records for the relevant period.  The rules vary by type of tax but for Corporation Tax it is six years after the end of the tax year.  HMRC will receive a copy of the report, as a creditor, and decide whether to take action if the liquidator has been unable to obtain figures.  As far as I know, this would not normally become public unless it ends up in court which could take years. 

Are HMRC a creditor?  They aren't shown as such on the Statement of Affairs although presumably they have to be informed when a company goes into liquidation?

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Forgive me if im being dumb.....but i cant understand why he was VAT registered in the first place.....i don't recall his turnover exceeding 85k in any one year.....

 

 

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1 minute ago, pheaton said:

Forgive me if im being dumb.....but i cant understand why he was VAT registered in the first place.....i don't recall his turnover exceeding 85k in any one year.....

 

And while we're on about VAT, did anybody ever understand quite how, as far as DJM Ltd was concerned, the "fact" that VAT had been paid on a deposit allegedly precluded its being refunded?

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35 minutes ago, The Stationmaster said:

Are HMRC a creditor?  They aren't shown as such on the Statement of Affairs although presumably they have to be informed when a company goes into liquidation?

I believe they are informed, like all potential creditors, via the compulsory publication in the Gazette.

Rgds

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2 hours ago, two tone green said:

Could he pawn his PM’s cup for modelling to pay off things ? 

 

Surely the place to flog it would be Ebay ? 'Rare, valuable, last chance to buy, etc.....'

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Posted (edited)
1 hour ago, pheaton said:

Forgive me if im being dumb.....but i cant understand why he was VAT registered in the first place.....i don't recall his turnover exceeding 85k in any one year.....

 

 

Nor is mine, but it's a big advantage to be able to reclaim VAT on business expenses, that's why I registered. If your supplies come from elsewhere in the EU you hand over your number and the supply doesn't have VAT applied at the point of sale. 

Also imports from China have VAT levied on them on importation. If it sits in stock for some time you have 20% tied up that hasn't been reclaimed.

Edited by maico
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The VAT was obvious....He expected that his VAT taxable turnover to be more than £85,000 so he had to register. That is releasing just one of his locos.

 

Ed

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Turnover should have been well above the revenue threshold for at least a couple of years.

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2 hours ago, melmoth said:

 

I find that it's reasonably easy to make a profit, it's making a living that's a bit more complicated...

I found a big problem in trying to start from scratch was to build up enough stock to get people interested. The conundrum was to have enough time to develop a business which made enough to live on without giving up the day job. 

My son on the other hand was in the position where the office he managed in the West of Ireland was closed down and he was offered a job in Dublin. He and his girlfriend who worked in the same company decided to set up themselves and have done well out of it to the extent of buying a house with land for cash. He says the biggest problem is balancing how much work to do and how much to pay yourselves in order to minimise tax.

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Posted (edited)
38 minutes ago, TheSignalEngineer said:

He says the biggest problem is balancing how much work to do and how much to pay yourselves in order to minimise tax.

Oh, for his problem! ;)

Edited by truffy
Removed the ‘s’! :)
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You can minimise tax by not paying yourself anything. :)

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14 minutes ago, Colin_McLeod said:

You can minimise tax by not paying yourself anything. :)

But you also have to balance that against any taxation on the business - possibly advantageous for it to buy a new car etc.

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I leave it to the accountant, I pay corporation tax but that is a lesser % than personal (IIRC)

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Corporation tax is usually less than income tax so keep the profits in the company.  On the other hand if you don't pay yourself a proper income then the tax advantages of pension contributions are reduced to your disadvantage.

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DJ is a prime example of the Dunning Kruger effect. Which wouldn't be so bad (I suspect all of us are subject to it to a certain degree, it's like the old joke that there are no bad drivers in the world based on how people judge their own driving) but he never had any inhibitions about sharing his opinions on the management of other companies and presenting himself as something of a whizz when it came to running a model railway company.

 

I see two questions as being of interest in this mess. The first is clearly to explain the seeming imbalance between what money flowed into DJM with the seeming absence of any assets and limited product delivery. If DJM really did have enough crowd funder commitments to make models like the King, 92 and most importantly the APT viable then they represent a significant amount of money which flowed in and for which there appears to have been no actual product development beyond some CADs (very limited CADs in the case of the APT). That's before considering revenue from earlier commissioning work and projects which were delivered. I don't for a minute think DJ should have worked for nothing and any business exists to make a return for its owners and shareholders but I do wonder how much he took out of the business as salary, fees etc. The second concerns the CADs and their value write down in the SoA. A CAD would have some value, limited perhaps but nevertheless they'd be worth something to somebody. Now some of them may have been caught up in the dispute with Chinese factories (it is clear that all of DJM's CAD development was contracted to factories as well as the manufacture) but the later ones should have been developed after the infamous factory dispute. Now, it may be that the later ones weren't paid for and so are being held by the factories on that basis but in that case I circle back to my first question - a lot of money was raised for some of those projects and if factories have not been paid and there is nothing left in the pot then where did the money go? And if the CADs are held by DJM then why are they listed as having no value?

 

 

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Posted (edited)

Surely the CAD could just a case of posting the cost to prepayments (normally held in a subsection of the assets section of a balance sheet), and then depreciate against expenses when the project is delivered, or in equal measures for the life of the tooling, to match revenue to expense (accruals concept in accounting) and determine profit?

 

With no future to the company this class of asset then has no realisable value...

Edited by Jonboy

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2 minutes ago, Jonboy said:

Surely the CAD could just a case of posting the cost to prepayments (normally held in a subsection of the assets section of a balance sheet), and then depreciate against expenses when the project is delivered, or in equal measures for the life of the tooling, to match revenue to expense (accruals concept in accounting) and determine profit?

 

With no future to the company this class of asset then has no realisable value...

 

I don't think the CADs would have a very high value (after all the reason some projects stalled at CAD stage is because it is moving beyond CAD where the serious costs start) however I think they would have some value. A company might see the potential to make an N gauge King themselves and a CAD drawing would be useful as a research aid even if they decided to develop their own CADs. It might be a short cut in development to work with the factory that had developed the CAD for DJM. It may have value simply to take it off the market. As I say I'm not saying they'd be worth ££££££££'s but equally I'd expect them to be worth at least something and there is just something that doesn't add up about it all.

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18 minutes ago, jjb1970 said:

DJ is a prime example of the Dunning Kruger effect. Which wouldn't be so bad (I suspect all of us are subject to it to a certain degree, it's like the old joke that there are no bad drivers in the world based on how people judge their own driving) but he never had any inhibitions about sharing his opinions on the management of other companies and presenting himself as something of a whizz when it came to running a model railway company.

 

I see two questions as being of interest in this mess. The first is clearly to explain the seeming imbalance between what money flowed into DJM with the seeming absence of any assets and limited product delivery. If DJM really did have enough crowd funder commitments to make models like the King, 92 and most importantly the APT viable then they represent a significant amount of money which flowed in and for which there appears to have been no actual product development beyond some CADs (very limited CADs in the case of the APT). That's before considering revenue from earlier commissioning work and projects which were delivered. I don't for a minute think DJ should have worked for nothing and any business exists to make a return for its owners and shareholders but I do wonder how much he took out of the business as salary, fees etc. The second concerns the CADs and their value write down in the SoA. A CAD would have some value, limited perhaps but nevertheless they'd be worth something to somebody. Now some of them may have been caught up in the dispute with Chinese factories (it is clear that all of DJM's CAD development was contracted to factories as well as the manufacture) but the later ones should have been developed after the infamous factory dispute. Now, it may be that the later ones weren't paid for and so are being held by the factories on that basis but in that case I circle back to my first question - a lot of money was raised for some of those projects and if factories have not been paid and there is nothing left in the pot then where did the money go? And if the CADs are held by DJM then why are they listed as having no value?

 

 

Of the recent CADs I have been informed by a reliable source that the factory was operating a backloaded arrangement so nothing need be paid until the tooling/production stage and the latter would see the outstanding costs from earlier stages of the work charged on a per unit basis.  This definitely applies in the case of the 'King' where the CADs (seemingly completed although I am aware of one uncorrected error on the tender of some versions) are sitting with the factory and in effect are waiting for somebody, anybody, who has the wherewithal to finance the upcoming and expensive stages of the project and pick up the ball and run with it.  The 'King' CADs were, as far as I can make out, in effect largely - if not entirely - reviewed by contributors to the thread here on RMweb as the early versions came with considerable errors for particular versions. 

 

I think the Class 92 is with the same factory although whether anybody would want to do anything with that ball is an open question in view of what is coming from elsewhere in both 00 and N.   I don't know if the APT is with the same factory but in any case all it consists of is part completed CADs for only two vehicles - in other words it is barely off the ground in terms of CAD development,  There was of course scanning costs for the APT and, it appears, work on the outputs of the scan before the information was in a state to send to the factory.

 

Thus coming back to your question in respect of what money went where I refer the honourable gentleman to my earlier posts on the matter - we don't know, and I continue to hold the view that we almost certainly never will know.  But whatever funding was handed over for the 'King' it definitely has not bought the CADsbecause they haven't yet been billed, and won't be unless the model is made.  But no doubt time was charged for research (mainly on RMweb I suspect :rolleyes:).  The same might well apply in the case of the Class 92 - again we don't definitely know but if it's on the same deal as the 'King' the CADs are sitting there in the hands of the factory and haven't yet been billed.

 

The APT is a little different because there was definitely a scanning, and post scanning processing, cost but again the numbers remain known only to DJM. 

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26 minutes ago, jjb1970 said:

 

I don't think the CADs would have a very high value (after all the reason some projects stalled at CAD stage is because it is moving beyond CAD where the serious costs start) however I think they would have some value. A company might see the potential to make an N gauge King themselves and a CAD drawing would be useful as a research aid even if they decided to develop their own CADs. It might be a short cut in development to work with the factory that had developed the CAD for DJM. It may have value simply to take it off the market. As I say I'm not saying they'd be worth ££££££££'s but equally I'd expect them to be worth at least something and there is just something that doesn't add up about it all.

The recent CADs might well have a marketable value - most likely for the 'King' in my opinion but in that case it is worth zero to the DJM assets because it doesn't form part of them.  All comes back to my earlier points about the value of the CADs and quite what the claimed £33K 'value' represents is difficult to understand I can fully understand that the realisable amount is zero.

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Posted (edited)
9 hours ago, AY Mod said:

I've taken a look at the Companies House entries for Final Accounts to be created as part of the liquidation of for other businesses where CG Recovery have handled the process and it seems that it takes 8-12 months where the situation is comparatively straightforward, the examples I looked at had a small number of unsecured creditors. So don't expect anything illuminating any time soon.

 

However, they do seem to have the mechanisms to proceed even if full information isn't made available to them as shown in this example.

 

https://www.rmweb.co.uk/community/uploads/monthly_2019_07/1557287761_DupreeCapture.JPG.36a50415693121a6647a6acf22823fe3.JPG

 

A theoretical scenario:

So Mr Dupree Solution's Company goes into Receivership/Liquidation.  Mr Dupree is uncooperative, with £107K's worth of assets under the mattress/buried in the garden/hidden under the loft insulation.  All gets too complicated for the Receiver, so Receiver gives up and Dupree Solutions (2019) Limited disappears; people who lost money can go whistle for it.  Meanwhile, Dupree Solutions (2020) starts up, with Mrs Dupree at the helm.....

Am I missing something here.....

Edited by polybear
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14 minutes ago, polybear said:

 

A theoretical scenario:

So Mr Dupree Solution's Company goes into Receivership/Liquidation.  Mr Dupree is uncooperative, with £107K's worth of assets under the mattress/buried in the garden/hidden under the loft insulation.  All gets too complicated for the Receiver, so Receiver gives up and Dupree Solutions (2019) Limited disappears; people who lost money can go whistle for it.  Meanwhile, Dupree Solutions (2020) starts up, with Mrs Dupree at the helm.....

Am I missing something here.....

Sadly you appear to have hit the nail on the head and there is very little anyone who has lost money can do about it which is very wrong.

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