Silvermoon jewellery firm collapse reveals huge tax debt

Thursday, 14 March 2024

Six shops in the Silvermoon jewellery chain have closed after the company was put into voluntary liquidation.

A collapsed chain of nationwide jewellery stores that received $1.16 million in Covid wage subsidies now owes Inland Revenue a huge tax debt.

Keeper’s Quarter & Co Ltd, which operated 10 shops around the country under the Silvermoon name, went into voluntary liquidation last month with the appointment of Auckland practitioner Bryan Williams as liquidator.

Three shops in Auckland and one in Nelson remain open, as does the company’s online business.

Williams’ first report shows the company owes about $893,713 in PAYE tax, and $379,034 in GST.

Deducting tax from workers’ wages and not passing them on to the Inland Revenue is a criminal offence.

The company received $1,159,098 from the Ministry of Social Development up to August 2021.

Other debts on liquidation include $126,000 to staff and $2.4m to unsecured creditors.

Williams said staff entitlements would probably be fully paid and a discount liquidation sale of the company’s stock was going very well, reflecting the strength of the company brand. The tax debt looked to go back about 12 to 14 months, he said.

But he did not fully accept the reasons given by Keeper’s Quarter’s director Peter Lee for the collapse of the company.

Silvermoon has a reputation for selling quality designer jewellery.

Lee has blamed reduced profit margins due to rising costs and longer production times. A cashflow crisis began in May 2023 and continued this year, he said.

In his report Williams gave his own view, saying that while the company had suffered from the Covid-19 pandemic it was “notable the management of the company did not respond to the commercial issues it was confronting in a decisive and forthright manner”.

“The strategy of seeking to trade out of its commercial challenges, without a restructure … has led to a slow and inevitable shrinking of its resources at the expense of the creditors of the company,” Williams said.

Williams told The Press his job was to report and not necessarily accept a director’s statement of affairs.

His comments were necessary in this case because of “the degree of exposure to key creditors”.

“I’m not going to just glibly accept the explanation if I don’t believe that is accurate or complete,” he said.

“Many, many directors today are getting the sense they have run out of gas and run out of options and they’re calling it quits…

“Any insolvency practitioner in the country would say that many of these companies continue way past the date they should have reckoned themselves as being not viable.”

Williams was very confident the business would find a new buyer prepared to invest.

In better days Silvermoon was the sponsor of the Mainland Tactix netball team.

“I’m attempting to strip down all the unnecessary expense and isolate a view of the viability of the business. I believe it will be very valuable in a new investor’s hands.”

Lee, who bought the business in 2017, said he was not in a position to provide detailed comments and wanted to reiterate his commitment to his team.

“During the Covid pandemic, thanks to the government’s wage subsidy scheme, we managed not to make any redundancies,” he said.

“The entire subsidy was allocated to support our team members, ensuring their financial stability. This is something I, and all who worked closely with me, take great pride in.”

The failure of the business was not due to a lack of effort, Lee argued.

The collapse of the Silvermoon jewellery chain has revealed a large tax bill.

“I have exhausted my resources, selling everything to keep the business afloat until the very end.”

He said a rumour he owned Maserati cars may have contributed to a negative view of the collapse. Lee said he had never owned a Maserati.

An Inland Revenue spokesperson said its number of completed prosecutions had declined over the last five years, mainly due to the re-prioritisation of compliance work while “we delivered Covid-19 support”.

“That’s had a flow-on effect on new prosecutions being taken. Compliance work is returning to pre-Covid levels and we expect prosecution work will increase in line with that.”

In the year to 2019, Inland Revenue completed 68 prosecutions. That number reduced to 34 in the year to June 2023.

Inland Revenue did not record prosecutions by tax type, the spokesperson said.

“Enforcement activity is usually a last resort, after we have tried education and contacted the taxpayer, often multiple times.”

Last month Dunedin company director Leslie John McKenzie was jailed for two-and-a- half years on 48 charges of aiding and abetting his three companies to deduct tax from workers’ wages, which were never passed on to Inland Revenue.