The Commissioners for HMRC v Purity Limited

In a public-interest winding-up petition under Finance Act 2022 section 85, the respondent company may raise public law defences in the petition proceedings. The statutory scheme contains no express or implied restriction requiring such challenges to be brought exclusively by judicial review.

The petition court must determine jurisdictional issues, including whether the company is a relevant body and whether the statutory decision was made by an HMRC officer. It may also determine disputed factual and tax-avoidance issues on the evidence. A stay pending judicial review is not generally justified where the petition court can determine the issues and the proceedings are ready for trial.

HMRC presented a public-interest winding-up petition against Purity Limited under section 85 of the Finance Act 2022. HMRC alleged that the company operated a disguised remuneration scheme and was a relevant body within the statutory definition.

The company sought a stay pending its judicial review challenge to HMRC’s decision to issue and prosecute the petition. It argued that public law issues could be determined only by the Administrative Court and that a stay would avoid parallel proceedings, duplicated costs and disputed tax issues being determined in the wrong forum.

The central questions were whether public law defences could be raised in the petition proceedings and whether the proceedings should nevertheless be stayed.

1. The stay application was refused. The petition remained listed for trial.

2. Section 85 of the Finance Act 2022 is to be treated in the same way as a public-interest petition under section 124A of the Insolvency Act 1986. The court must be satisfied that the company is a relevant body and that it appears to HMRC expedient in the public interest, for the protection of public revenue, that the company should be wound up. The court must then decide whether it is just and equitable to make the winding-up order.

3. The statutory language and purpose disclose no express or implied restriction on a respondent raising public law defences in answer to a section 85 petition. The petition is not an enforcement proceeding of the type considered in Beadle v HMRC [2020] EWCA 562, where the statutory scheme excluded collateral challenges at the penalty and enforcement stages. In a public-interest petition, there may have been no reasonable opportunity to challenge the underlying administrative decision before the petition was issued.

4. The petition court must determine the jurisdictional issues, including whether the company is a relevant body and whether the decision was made by an HMRC officer. The company may challenge HMRC’s evidence on whether the scheme constitutes tax avoidance. The court can determine factual disputes, order disclosure and direct cross-examination where appropriate.

5. No stay was justified pending judicial review. The petition was effectively ready for trial, the court was capable of deciding the issues, and the listing arrangements allowed the judicial review permission process to progress first. Parallel tax or tribunal proceedings did not require a stay. The different test applicable to a creditor’s petition, where a disputed debt may prevent reliance on the winding-up jurisdiction, provided no useful analogy.

First-instance decision. No appellate history was stated in the judgment.