In November of last year I blogged about a High Court decision (Parkwell Investments) which had put the cat amongst the pigeons by declining to follow an earlier decision at the same level (Enta Technologies), and which held that a court exercising winding up jurisdiction could effectively usurp the role of the First Tier Tribunal (Tax) (FTT) in an appropriate case.
Although strangely the Court of Appeal does not appear to have been referred to Parkwell during submissions, it nevertheless reached effectively the same conclusion, formally overruling the Enta decision to put this issue now beyond doubt.
It follows that the note of caution raised in my previous blog now rings all the louder. A court exercising winding up jurisdiction (typically the High Court in London where HMRC will almost always petition), which some would say is the wrong forum to be summarily determining a tax dispute, will be able to hear detailed evidence on the liabilities properly due and make that decision without reference to the tribunal. Companies facing VAT demands cannot, therefore, afford to rest on their laurels or assume that just because their accountants and/or tax advisers say they have a basis to appeal, even if the FTT agrees with that assessment initially (as happened in Enta), they will be able to resist compulsory winding up by the court based upon the disputed assessment.
This would appear to make the case still more strongly for directors to take insolvency advice early, pretty much as soon as they receive a VAT demand they know or suspect the company is or would be unable to pay, even if it appears that the amount of the demand may be inflated and even if they are still investigating sources of funding to plug the gap. In addition to this action protecting the directors to an extent against the prospect of personal liabilities and / or disqualification in the event of a formal insolvency following this, it may be possible for an insolvency practitioner accountant to take steps to insulate the core business against the often devastating effects of a winding up petition.
The Court of Appeal’s decision can be viewed here: HMRC v Changtel Solutions UK Ltd  EWCA Civ 29 (28 January 2015)
If you are a director or accountant looking to bring in appropriate, independent insolvency practitioner accountant advice for you / your clients which will best protect you / them against the sort of proceedings which I deal with every day, please feel free to contact me for an impartial recommendation.