An island-based company with links to businessman Doug Barrowman has been accused of paying improper dividends to shareholders.

Principal Contracts Ltd (PCL) was engaged in the supply of nursing staff to the NHS in the UK.

It was placed into a creditors’ voluntary winding-up in January 2020 over an unpaid VAT bill of £5.38m. Craig Mitchell was appointed liquidator.

According to the liquidator, the high court heard that Doug Barrowman was or may have been the company’s ultimate beneficial owner or shadow director from December 2014 until it went into liquidation.

He was one of those, it is claimed, that had been in receipt of significant dividends wrongly paid to shareholders at a time when the company, due to an apparent error in its treatment of VAT, had not been making any profits.

Details of the case emerged in a high court judgment delivered this month by Deemster Andrew Corlett.

PCL ceased trading in April 2017.

This resulted in a VAT inspection as a result of which it became clear that the company had significantly under-declared its VAT liability.

In November 2018 Customs and Excise Division raised an assessment for £4,765,638 plus interest and penalties of £616,666 and £1,280,974 respectively.

PCL offered to pay £1m plus £100,000 per month for 12 months but this was rejected by the Treasury and at that point the directors realised the company was insolvent.

Mr Mitchell didn’t issue a claim form until June 2023, some three and a half years after he was appointed liquidator.

He said he had not able to properly consider the position until early 2023 due to various factors, including the Covid pandemic and issues that arose with accessing documents and funds when he moved from his former firm to set up his own consulting practice.

Deemster Corlett had made orders in November and April which extended the period of time for service of the liquidator’s claim form.

But following a successful application by the eight defendants in the case, he set aside those orders.

Deemster Corlett said no fresh information came to Mr Mitchell since October 2020 and there was no explanation or good reason for the failure to serve proceedings until June 2023.

The Deemster said the liquidation had raised ‘certain concerning issues’ including the fact that PCL had and apparently still has no approved accounts covering the periods of the alleged unlawful payments.

And he said the financial statements which do exist appear to portray a very different picture to those that were originally prepared.

Accounts provided to the liquidator show turnover of £22.9m, profit of £1.6m and a dividend payment of £1.8m for the year to December 2015 but the accounts and tax return for that year report turnover of £41.8m, profits of £6.3m and dividends of £4,841,548.

‘It is clear from the competing versions of the company’s accounts that there is a substantial dispute as to the true financial position of PCL at the material times,’ said Deemster Corlett.