The Commissioners for HMRC v Payroll & Pension Services (PPD Umbrella Company) Ltd

The appointment of a provisional liquidator is an exceptional and potentially fatal interim remedy. On a without notice application, the petitioner must show a likely winding-up order, provide full and frank disclosure, and establish that appointment is appropriate to protect the company’s assets, broadly understood to include records and potential claims. HMRC’s application to wind up a company for unpaid tax or National Insurance contributions is debt collection, not public law enforcement. The public-authority exception to the ordinary requirement for a cross-undertaking in damages therefore does not ordinarily apply. An unlimited cross-undertaking is required unless the circumstances compellingly justify dispensing with it.

HMRC applied without notice under Insolvency Act 1986, section 135, for the appointment of provisional liquidators over an umbrella company. The proposed winding-up petition relied on a substantial estimated liability for employer’s National Insurance contributions, supported by evidence of under-declaration, possible dissipation of assets, and insolvency. The petition was corrected before the order was made because it inaccurately alleged that HMRC had demanded payment.

The court had to decide whether the application could properly proceed without notice, whether provisional liquidation was the appropriate remedy, and whether HMRC had to give a cross-undertaking in damages.

1. Provisional liquidation. The court applied the seven principles summarised in HMRC v Winnington Networks Ltd and Bartel Networks Ltd [2014] EWHC 1259 (Ch). Appointment is a most serious step. On a without notice application, the petitioner must show exceptional circumstances, a likely winding-up order, a fair presentation with full and frank disclosure, and that appointment is the right course in all the circumstances. Protection of assets includes securing records and potential claims connected with investigations into management.
2. Without notice relief. The evidence showed a substantial debt, inability to pay, suspected labour-supply fraud, payments to connected persons, and a risk that assets or records would be dissipated or destroyed if notice were given. The earlier routine HMRC enquiry did not sufficiently disclose the specific case now advanced. Notice could therefore frustrate the purpose of the remedy.
3. Alternative relief. A freezing order and document-preservation order would not adequately secure assets already transferred away. The court followed the reasoning in Revenue and Customs Commissioners v Egleton & Ors [2006] EWHC 2313 (Ch) that cogent reasons would be needed before bypassing the ordinary provisional-liquidation route.
4. Cross-undertaking. The authorities establish a discretionary exception for public law enforcement actions. That exception does not extend merely because HMRC is a public authority or recovery benefits the public. A winding-up petition to recover a tax or National Insurance debt is an action to enforce a debt, not enforcement of the law by the only statutory means available. The ordinary protection of a cross-undertaking therefore applies. The observations in Rochdale Drinks [2012] 1 BCLC 748 supported requiring an undertaking, and Abbey Forwarding Limited (In Liquidation) v HMRC [2015] EWHC 225 (Ch) was respectfully adopted. Parkwell Investments [2014] BCC 721 was not followed to the extent it treated HMRC’s tax-recovery function as sufficient to dispense with the undertaking.
5. HMRC was required to give an unlimited undertaking in damages. After HMRC provided it, the order appointing provisional liquidators was made. The court also accepted that the director retained residual authority to challenge the appointment or resist the winding-up order, applying Ashborder v Green Gas Power [2005] EWHC 1031 (Ch) and Re Mortgage Five Zero Ltd [2023] EWHC 2654 (Ch).