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  • Writer's pictureInchmead

Bross Bagels chain fails with £574k tax debt

The owners of a Scottish bagel chain, known as Bross Bagels, face liquidation owing over £500,000 to HMRC

Founder Larah Bross lodged a petition earlier this month for the business to be wound up at Edinburgh Sheriff Court and for an interim liquidator to be appointed.

Last month, the Edinburgh-based chain was hit with a warning of winding-up action by HMRC as it owed £574,132.03 in unpaid taxes.

It could potentially lose its assets, have its bank account frozen, and have to pay legal and other costs.

The chain, based in Edinburgh, was hit with a warning of winding up action by HMRC last month, for £574,132.03. The next day, on 14 July, Bross registered a new business at Companies House, registering herself as the sole shareholder and trading as Hot Mama Bagels Ltd.

The letter from HMRC’s debt management division stated: ‘If the company does not pay in full or contact us about a payment plan by 3 August 2023, we may apply for a winding-up order against the company for this debt.’

The letter goes on to warn that if the company is wound up the business could lose its assets, have its bank account frozen and may have to pay legal and other costs.

On top of this, the business was also found to owe £625,000 to creditors. In total, this brings the company’s debt to £1.2m.

Following a statement from Bross Bagels’ financial department, suppliers were contacted and informed that the business had been placed in administration. As a result, some local businesses have threatened to withhold their services and are seeking payment.

According to the company’s latest financial accounts, around £144,000 is due to creditors, who donated money through a ‘shareholders’ crowdfunding campaign in October 2020.

The crowdfunding initiative asked supporters to invest £1,000 each to part-finance a larger outlet and bakery in return for annual bagel vouchers and VIP benefits, with their money due to be returned after four years.

But despite supporters being told that they had nothing to worry about, the scheme had the potential to be annulled, according to its terms and conditions, in the event of ‘the insolvency and cessation of the company’, with all joining fees being ‘automatically terminated’ as a result.

The expansion included opening two more shops in the city, and it later rolled out two stores in other city locations.

According to Companies House, Bross Bagels Limited’s latest annual accounts to 30 June 2022, showed the business had net liabilities of £546,339. Short-term liabilities, money due to creditors within one year, totalled £770,062, the largest of which was £402,944 due to ‘other taxation and social security’, while trade creditors at that date were due £157,270. Longer-term creditors, amounts falling due after more than one year, totalled £486,626, including the sum of £144,000 due to creditors who donated money through the crowdfunding initiative.

Currently, Bross has claimed that the business would continue trading and that, following a restructuring, was battling to secure jobs.

Bross said: ‘All the jobs have been safeguarded and we are a bagel business as usual. I think everyone is aware of how hard it’s been for the hospitality sector over the last few years and things continue to be tough, but we are working tirelessly to keep ourselves trading.

‘We have taken professional advice, and a restructure has allowed us to safeguard all jobs and the good news is that it’s business as usual for bagel lovers.’

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