The Commissioners for HMRC v Purity Limited

The court considered an application by the respondent company for a stay of a winding-up petition presented by HMRC under section 85 of the Finance Act 2022 (a public interest petition). The court held that a respondent to a section 85 FA 22 petition is able to raise and rely upon public law defences in the petition proceedings, and that there was no express or necessary implication in section 85 FA 22 restricting such defences. The deputy judge treated section 85 FA 22 petitions as analogous to section 124A Insolvency Act 1986 public interest petitions and applied established authorities including Beadle v HMRC in construing whether collateral public law challenges are excluded.

Having concluded that the Insolvency and Companies Court could determine jurisdictional and public law issues, the court refused the company’s application for a stay pending resolution of its judicial review and other tax proceedings. The judge found that two of the company’s judicial review grounds (whether the company is a 'relevant body' and whether the decision was taken by an authorised officer) were jurisdictional matters properly for the insolvency court, and that there was no sufficient exercise of discretion to warrant a stay on grounds of multiplicity, specialist expertise or cost saving.

Background and relief sought. The petition was issued by HMRC on 20 March 2024 under section 85 Finance Act 2022 seeking the winding up of Purity Limited on public interest grounds for the protection of the public revenue. The company applied (by application notice dated 12 July 2024) for a stay of those petition proceedings pending the determination of the company’s judicial review challenge to HMRC’s decision to issue and prosecute the petition, and also sought stays pending related tax tribunal proceedings.

Parties and factual context. Purity Limited ran an umbrella payroll/advance scheme for workers. HMRC treated the scheme as disguised remuneration/tax avoidance, served a stop notice and issued PAYE determinations. The company ceased trading and brought judicial review proceedings challenging HMRC’s decision-making under s85 FA22 on several grounds (including consultation, interpretation of 'relevant body', whether the decision was taken by a sole designated officer, and irrationality/unreasonableness).

Procedural posture. The application to stay the winding-up petition was heard on 3 October 2024 before Deputy Insolvency and Companies Court Judge Raquel Agnello KC. The petition was otherwise ready for trial and the judge had given directions to list the petition for trial (likely autumn 2025).

Issues framed by the court.

• Whether a respondent company may raise public law defences in proceedings on a section 85 FA 22 public interest winding-up petition, or whether such challenges must be pursued exclusively by way of judicial review.
• Whether, on the exercise of discretion, a stay of the petition should be granted pending the outcome of the company’s judicial review or other tax proceedings.

Court’s reasoning. The court compared section 85 FA 22 with section 124A Insolvency Act 1986 public interest petitions and concluded the statutory language and purpose permit the insolvency court to hear and decide public law issues raised in defence to a petition. The judge applied the reasoning in Beadle v HMRC to determine whether the statutory scheme excluded collateral public law challenges; she concluded there was no such exclusion in section 85 FA 22 and that the company could therefore raise public law defences in the petition proceedings. Two of the judicial review grounds (the meaning of 'relevant body' and whether the decision was taken by an authorised officer) were characterised as jurisdictional matters for the insolvency court to decide prior to any winding‑up order. On the exercise of discretion, the court found no sufficient basis to grant a stay given that the petition was ready for trial, there was no demonstrable multiplicity or unfairness arising from concurrent proceedings, and the insolvency court is competent to determine specialist tax and public law issues.

Conclusion. The application for a stay was refused. The judge directed that the petition proceed to trial at the appropriate time, noting that any permission in the Administrative Court judicial review would inform case management steps but would not automatically justify a stay.

The application for a stay was refused. The court held that a respondent to a section 85 Finance Act 2022 public interest winding-up petition may raise and rely upon public law defences in the Insolvency and Companies Court, that jurisdictional questions (including whether the company is a 'relevant body' and whether an authorised HMRC officer made the decision) fall to that court, and that there was no proper exercise of discretion to justify a stay pending the outcome of judicial review or tax tribunal proceedings.