Revenue and Customs v SED Essex Ltd: ChD 14 Jun 2013

Liquidator confirmed despite VAT challege

The Revenue sought the winding up of the company for non-payment of substantial arrears of VAT. The revenue had declined to allow VAT input claims. The company said that the petition was wrong since the debt was genuinely disputed.
Held: The decision to appoint the provisional liquidator was maintained.
The court in the Rochdale Drinks case had now modified the test for the appointment of a provisional liquidator so that: ‘ the law now is that a judge dealing with such an application should consider it in 2 stages. The first and threshold stage is to consider whether the petitioner and applicant has demonstrated that it is likely to obtain a winding-up order on the hearing of the petition. Any views the judge may express about that will of course be provisional, because the petition itself is not being tried at the time of the application. If such likelihood is not demonstrated, it would not, at least ordinarily, be right to appoint a provisional liquidator. If on the other hand it is demonstrated, and the threshold thus crossed, then the second stage is to consider whether in the circumstances of the particular case, it is – as a matter of judicial discretion – right that a provisional liquidator should be appointed (or, where as here one has already been appointed, should be maintained in office) pending the hearing of the petition.’
The Revenue had satisfied the court that ‘both:
(a) there was fraudulent evasion of VAT connected (at whatever stage) to the Company’s purchases during the relevant 12 months, and
(b) the Company, in the person of Holly Sawyer, either knew that its purchases during that period were connected with the fraudulent evasion of VAT, or should have known that the only reasonable explanation for the circumstances in which they took place was that they were so connected or ignored obvious inferences to that effect from the facts and circumstances in which the Company had been trading’ and ‘the evidence in this case does raise real questions as to the integrity of the Company’s management, and the quality of the Company’s business documentation, and accounting and record keeping functions.’ Both stages of the test were satisfied.

John Randall QC
[2013] EWHC 1583 (Ch)
Insolvency Act 1986 122(1)(e) 123
England and Wales
CitedRevenue and Customs v Rochdale Drinks Distributors Ltd CA 13-Oct-2011
The revenue appealed against refusal of its petition for the winding up of the company for non-payment of a VAT assessment. The company said that the assessment was disputed. The revenue said that the company had been run for the purpose of . .
CitedRe Union Accident Insurance Co Ltd ChD 1972
A provisional liquidator cannot be appointed on a baseless petition. There are two conditions to be met. The first was that the petition must disclose a prima facie case, the second was that there were circumstances that require that a provisional . .
CitedThe Niedersachsen ChD 1983
In order to obtain, or to enlarge a freezing order, the applicant must show that in considering the evidence as a whole he has, at a minimum, a ‘good arguable case’, and also the existence of a real risk of dissipation or secretion of assets. . .
CitedMobilx Ltd and Others v HM Revenue and Customs; Blue Sphere Global Ltd v Same and similar CA 12-May-2010
Each company sought repayment of input VAT. HMRC refused, saying that the transactions were the end-product of a fraud on it, and that even if the taxpayer did not know that a fraud was involved, it should have been aware that one was and acted . .
CitedAxel Kittel v Belgian State; Belgian State v Recolta Recycling SPRL ECJ 6-Jul-2006
ECJ Sixth VAT Directive – Deduction of input tax – ‘Carousel’ fraud – Contract of sale incurably void under domestic law.
The right of a taxpayer to deduct Input Tax may be refused if: ‘it is ascertained, . .
CitedCommissioners of Customs and Excise v Anglo German Breweries Limited ChD 29-Nov-2002
The respondents appealed against imposition of assessments for the diversion of alcohol products from bonded warehouses without payment of duties. Pretence had been made of deliveries abroad, but the goods were later diverted. The company was . .
CitedThe Commissioners for Customs and Excise, The Arena Corporation Limited v The Arena Corporation Limited / Schroeder ChD 12-Dec-2003
. .
CitedCustoms and Excise v Anglo Overseas Ltd ChD 5-Oct-2004
. .
CitedIn re The Arena Corporation Limited; Commissioners for Customs and Excise v The Arena Corporation Limited; the Arena Corporation Limited v Schroeder CA 25-Mar-2004
Sir Andrew Morritt V-C said that in the context of winding up proceedings the test for whether there is a genuine triable issue in a disputed claim, is whether the debt is bona fide disputed on substantial grounds, which, for practical purposes, is . .
CitedHM Customs and Excise v Jack Baars Wholesale, Baars, and Baars CmpC 16-Jan-2004
. .
CitedRe Autotech Design Ltd, HMRC v Autotech Design Ltd ChD 2006
Michael Briggs QC summarised the approach to be adopted by the court at the hearing of for the appointment of an interim liquidator pending the hearing of an insolvency petition brought by the Revenue: ‘Although the formulations of the approach to . .
CitedRed 12 Trading Ltd v Revenue and Customs ChD 20-Oct-2009
Appeal against refusal to allow reclaim of input tax in case of alleged ‘Missing Trader Intracommunity Fraud’.
Held: Christopher Clarke J said: ‘Examining individual transactions on their merits does not, however, require them to be regarded . .
CitedPayless Cash and Carry Ltd v Patel and Others ChD 29-Jul-2011
The claimant company, in liquidation, claimed large sums from the first defendant as a director who wrongfully and fraudulently caused it to incur a liability to HMRC for wrongfully claimed input tax on various liquor purchases.
Held: Mann J . .

Lists of cited by and citing cases may be incomplete.

Insolvency, VAT, Company

Leading Case

Updated: 31 October 2021; Ref: scu.510872