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Company Winding Up Ruling Boosts HMRC’s Armoury

HMRC2In a fresh warning to companies that falling out with the tax authorities can have the most severe consequences, a Court of Appeal ruling has significantly boosted the armoury of HM Revenue and Customs (HMRC) in dealing with defaulters.

During a period of little more than two years, HMRC had issued no fewer than 36 VAT assessments against a technology company, totalling £15.5 million. The company had lodged appeals to a tax tribunal. However, HMRC had simultaneously petitioned the Companies Court to have the company compulsorily wound up. The parallel sets of proceedings gave rise to a jurisdictional impasse.

The Companies Court took the view that it was obliged to defer to the tribunal. It refused to issue an immediate winding up order, or to allow HMRC’s petition to be advertised, on the basis that it was for the tribunal to decide whether the company was disputing the debt in good faith and on substantial grounds.

The Court of Appeal accepted that the tribunal would normally be the appropriate forum for resolving such issues. In upholding HMRC’s appeal, however, the Court found that the Companies Court was not always obliged to give way to the tribunal. On the ‘quite exceptional’ facts of the case, it was clear that the company had no viable defence and the Court directed that it should be wound up forthwith.