Gary Wagstaff v The Commissioners for HMRC

Where a company enters creditors’ voluntary liquidation while a National Insurance contributions liability remains enforceable, limitation time ceases to run for that liability. The company has one liability, administered through the liquidation; it is not simultaneously subject to a separate limitation regime outside it.

Accordingly, for section 121C(1) of the Social Security Administration Act 1992, a company remains liable to pay unpaid contributions after the ordinary limitation period would otherwise have expired. A personal liability notice may therefore be issued to a culpable officer while that liability subsists.

HMRC issued a personal liability notice to the appellant, a former director of Warehouse Holdings Ltd, for unpaid National Insurance contributions and interest. The company had entered creditors’ voluntary liquidation in November 2015.

The First-tier Tribunal dismissed the appellant’s challenge to the notice. It held that the company remained liable for the contributions when the notice was issued in March 2019.

On appeal, the appellant contended that the six-year period in section 9 of the Limitation Act 1980 had expired for most of the contributions. The central issue was whether the company was still liable to pay those contributions for the purposes of section 121C of the Social Security Administration Act 1992.

1. Appeal dismissed. The First-tier Tribunal made no error of law in holding that the company remained liable to pay the unpaid National Insurance contributions when HMRC issued the personal liability notice.

2. On entry into creditors’ voluntary liquidation, a company’s liabilities are determined as at the commencement of the liquidation. Subject to a claim not already being time-barred at that date, limitation periods then cease to run. The Tribunal followed In re General Rolling Stock Company (1872) LR 7 Ch App 646 and applied Financial Services Compensation Scheme Ltd v Larnell (Insurances) Ltd [2005] EWCA Civ 1408.

3. The appellant’s proposed distinction between a liability provable in the liquidation and a separate liability outside it was untenable. There was no separate regime under which the company’s unsecured liabilities could be assessed for limitation purposes after it entered liquidation. The same claim could not be enforceable for the liquidation but time-barred for the purpose of establishing liability under a personal liability notice.

4. The words liable to pay in section 121C of the Social Security Administration Act 1992 referred to the company’s single liability for the contributions. That liability continued after liquidation, although it would be administered in the liquidation and HMRC might receive no dividend. The company therefore had no limitation defence when the notice was issued.

5. Policy arguments about an extended period for issuing a notice could not alter that conclusion. A culpable director could remain liable while the company remained liable; once the company was dissolved, it was no longer liable and a notice could not be issued.

• Upper Tribunal (Tax and Chancery Chamber): dismissed the appeal and upheld the First-tier Tribunal’s conclusion that the company remained liable to pay the contributions: [2022] UKUT 327 (TCC).
• First-tier Tribunal: dismissed the appellant’s appeal against HMRC’s personal liability notice in a decision released on 19 August 2021.