Ex-WH Smith stores fear bailiffs over unpaid taxes

WH Smith’s former high street shops risk being raided by bailiffs after its new owner failed to pay millions of pounds in taxes.TG Jones, which owns hundreds of shops now trading under its made-up name, said it was being chased for a series of arrears stemming from overdue business rates bills owed to councils.The cash-strapped retailer currently owes £3.4m in outstanding business rates, along with £4m to suppliers and a further £8.4m to the taxman.Modella, the private equity company that owns TG Jones, said: “In recent weeks, the business has started to receive a significant number of demand letters and summonses as a result of the non-payment of business rates arrears.“Without funding to pay these outstanding business rates or the compromise of these amounts... the business is at risk of local authorities seeking to take enforcement action.”Bailiffs could either attempt to “seize goods” or present the company with a winding-up petition, Modella added.The dispute was revealed in documents published last week as part of an aggressive financial restructuring plan that would see landlords face swingeing cuts to the rents they receive.Modella has warned that TG Jones will run out of cash by the end of June unless landlords agree to dramatically lower rents or take long payment holidays.The private equity group has sought to blame TG Jones’s woes on a sharp downturn in trading caused by a combination of rising taxes and a name change that was forced upon it. Under the terms of the buyout, Modella wasn’t allowed to use the WH Smith branding.However, TG Jones’s proposals and its failure to pay tax bills have provoked the ire of MPs and landlords.Justin Madders, a former employment minister who sits on the business and trade select committee, told The Telegraph: “To many people, this will look like heads the investors win, tails the taxpayer loses.“If workers lose jobs, councils lose revenue and the public is left carrying the cost.”He criticised Modella for seeking to cash in on its ownership through a series of financial and commercial agreements, including charging the retailer millions of pounds in licence fees for the right to use the entirely fictitious TG Jones name.Mr Madders said: “What sticks in the craw is that while councils are left chasing unpaid business rates and HMRC is giving breathing space over millions in deferred tax liabilities, the company’s own restructuring documents show millions accruing in licensing fees payable within the wider ownership structure for use of the newly created TG Jones brand name.”Landlords being ‘clobbered’Landlords expressed anger at Modella’s drastic proposals, submitted to creditors in a 214-page dossier.Landlords of over 120 stores in TG Jones’s 450-strong estate are being asked to sign up for rent holidays, during which they will receive no income for three years. Hundreds more face cutbacks ranging from 15pc to 75pc.One landlord said she was “really p----d off with Modella”.“They’ve bought the business and rebranded it with a name that’s lost all the goodwill that went with it,” the landlord added.She said what was left was “a really below-par store portfolio that sells God knows what”.“Unsurprisingly, nobody wants to go there any more so it fell off a cliff.”Another landlord complained of being “clobbered” and warned that Modella was facing a possible rebellion that would see it forced to hand back the keys to some TG Jones shops.“The more proactive landlords, like us, will do everything they can to take them back and re-let them to someone else. We’ll do better with other retailers,” he said.Mr Madders said: “Nobody should pretend the high street is in an easy position. Retailers across the country are under huge pressure from online competition and changing shopping habits.“But Modella went into this deal with its eyes wide open. Private equity firms specialise in buying distressed businesses and taking calculated risks. That is their business model.”‘It’s absolutely scandalous’Stephen Springham, a retail specialist at Knight Frank, the property consultants, claimed books and stationery were “the best performing retail subcategory last year, bar none”.“They can’t blame market conditions. It’s absolutely scandalous,” he added.Mr Springham said the takeover was “probably the worst example we’ve ever seen of private equity sucking the soul out of the high street – the only one I would say was worse was BHS”.Alex Willson, the chief executive of TG Jones, told staff last week that the company anticipated as many as 150 store closures as landlords took advantage of break clauses allowing them to seek better deals with 43 days’ notice.Warning of expected redundancies, Mr Willson said: “We absolutely cannot carry on as we are or there will not be a viable business in the future.”The company’s creditors, including landlords, will vote on whether to back the turnaround plan in late June before it will be put before a High Court judge for approval on June 29.The restructuring plan is being led by the private equity-owned consultancy Teneo.Modella declined to comment.