Wagstaff v R & C Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 06 December 2022 |
| Neutral Citation | [2022] UKUT 327 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2022] UKUT 327 (TCC)
Mr Justice Michael Green, Judge Guy Brannan
Upper Tribunal (Tax and Chancery Chamber)
National insurance contributions – Personal Liability Notice – Company in creditors voluntary liquidation – Was the company liable to pay NICs – Whether notice issued out of time – No – General Rolling Stock principle applied – Appeal dismissed.
In Wagstaff v R & C Commrs [2022] BTC 537, the Upper Tribunal (UT) found that, under the General Rolling Stock principle, on entering a Creditors’ Voluntary Liquidation, time limitations on outstanding debt ceased to run. The company was still liable to pay National Insurance contributions at the time the Personal Liability Notice (PLN) was issued. The PLN was therefore not time-barred.
Mr Wagstaff was the sole director of Warehouse Holdings Ltd (WHL) between November 2009 and November 2015 when the company went into Creditors’ Voluntary Liquidation (CVL) owing National Insurance contributions (NICs) and interest amounting to £301,941.10. The amount owed was not in dispute.
HMRC issued a Personal Liability Notice (PLN) against Mr Wagstaff in March 2019 on the basis that he was a ‘culpable officer’ under the Social Security Administration Act 1992 (SSAA 1992), s. 121C. It was not disputed that WHL’s failure to pay was a result of Mr Wagstaff’s neglect, but he appealed on the ground that, at the time the PLN was issued, the debt was beyond the time limit set by the Limitation Act 1980 and consequently the PLN was time-barred. His initial appeal was refused by the First-tier Tribunal in Wagstaff [2021] UKFTT 299 and he now appealed against that decision to the Upper Tribunal.
It was common ground that in order for SSAA 1992, s. 121C to apply, the company must be ‘liable to pay’ the NICs and that the liability must exist when the PLN is issued against a director. Mr Wagstaff contended that as more that six years had elapsed between the due date for the NICs and the issue of the PLN, the operation of Limitation Act 1980, s. 9, meant that the company was no longer liable to pay the NICs and the PLN was therefore not valid.
HMRC cited In re General Rolling Stock Company (1872) LR 7 Ch App 646, which established the principle that all statutory time periods in respect of debt-recovery ceased to run (provided they have not already elapsed) at the point a company commences winding-up. Creditors need only prove that the debt was in time when the winding-up commenced for it to be accepted into proceedings and be recoverable..
Mr Wagstaff argued that the General Rolling Stock principle was a special rule which applied only for the purposes of insolvency and that for other purposes (such as the issue of a PLN) the limitation period continued to run.
The UT rejected Mr Wagstaff’s approach and cited Financial Services Compensation Scheme Limited v Larnell (Insurances) Ltd [2005] EWCA Civ 1408, in which the Court of Appeal found it ‘impossible to accept that the same claim can be time-barred for one purpose but not for another’. Provided the debt is still in time at the point when winding-up commences, though the quantum of the liability is established at that date, the liability continues to exist and the statutory time limits cease to apply. Consequently, at the time the PLN was issued against Mr Wagstaff, the company was still liable for the NICs and the PLN was not time-barred.
The appeal was dismissed
At first glance it may appear that in cases of liquidation, the General Rolling Stock principle means HMRC can delay the issue of a PLN indefinitely and that it will never be time-barred. However, in practice this is not so because when the company is finally dissolved, it is no longer liable to pay NICs (because it no longer exists). HMRC must therefore act whilst the winding up is still ongoing or the opportunity to issue a PLN is lost. In this case the company was not dissolved until a few months before the UT hearing.
Comment by Martin Jackson, Senior Tax Writer, Croner-i Ltd.
Sam Brodsky, Counsel appeared for the appellant
Giselle McGowan, Counsel, instructed by the General Counsel and Solicitor to His Majesty's Revenue and Customs appeared for the respondents
[1] This is an appeal against the decision of the First-tier Tribunal (“FTT”) (Judge Anne Scott) released on 19 August 2021 (“the Decision”). Mr Wagstaff, the Appellant, appeals against the FTT's Decision dismissing his appeal against a Personal Liability Notice (“PLN”) dated 13 March 2019 in the sum of £301,941.10 issued to Mr Wagstaff by the Respondents (“HMRC”) pursuant to section 121C of the Social Security Administration Act 1992 (“SSAA”) in respect of National Insurance Contributions (“NICs”) payable by Warehouse Holdings Limited (“WHL”).
[2] The relevant facts were agreed before the FTT. The sole issue before the FTT was whether the PLN was issued out of time in relation to all but a small percentage of the NICs liabilities therein. On behalf of Mr Wagstaff it was contended that any NICs in respect of periods prior to the tax month ending 5 March 2013 were statute barred by virtue of section 9 of the Limitation Act 1980 (“LA 1980”) at the date that the PLN was issued, those amounts having fallen due more than six years prior to that date. Accordingly, Mr Wagstaff argued that WHL was not “liable to pay” these sums at that date within the meaning of section 121C(1) SSAA.
[3] The FTT considered that the PLN was not time-barred and, accordingly, dismissed Mr Wagstaff's appeal. Mr Wagstaff now appeals to this Tribunal with the permission of the Judge Scott.
[4] For the reasons given below, we dismiss this appeal.
[5] As we have already mentioned, the facts were agreed before the FTT. The agreed facts were recorded by the FTT in the Decision at [4]–[11]:
[4] [Mr Wagstaff] was a director of WHL between 26 August 2005 and 1 October 2015 and he was the sole director between 16 November 2009 and 30 July 2015.
[5] WHL set up a PAYE scheme on or about 21 December 2009. This PAYE scheme was active throughout the period from on or about 21 December 2009 to August 2013. During this period WHL made deductions of PAYE income tax and NICs from its employees' salaries.
[6] WHL filed its end of year P35 Return for the tax year 2009/10 on 20 March 2012, almost two years after the deadline of 19 May 2010, declaring NICs due of £13,238.26. WHL failed to submit end of year P35 Returns for the tax years 2010/11 to 2012/13. Following the change to Real Time Information (“RTI”) in April 2013, WHL failed to submit monthly RTI returns for the tax year 2013/14.
[7] In the period June 2012 to October 2013 WHL made four payments to HMRC in respect of PAYE income tax and NICs totalling £22,258.68. Of these payments, HMRC allocated £11,129.34 to NICs for the period 2012/13 with the remainder allocated to PAYE income tax for the same period. WHL has failed to pay any further sums in respect of NICs deducted from its employees for the periods 2009/10 to 2013/14 to HMRC.
[8] WHL provided HMRC with computerised P11 Deduction Working Sheets recording deductions from its employees' salaries for the tax years 2009/10 to 2013/14 from which HMRC has been able to ascertain that the NICs that WHL deducted from its employees' salaries for these tax years were as follows:
Period NICs deducted
2009/10
£13,238.26
2010/11
£82,230.25
2011/12
£87,775.22
2012/13
£77,347.37
2013/14
£23,248.16
Total:
£283,839.26
[9] On 20 November 2015 WHL entered Creditors' Voluntary Liquidation (“CVL”).
[10] On 7 October 2016 HMRC submitted a proof of debt in WHL's liquidation for £1,124,910.57 including a claim for unpaid NICs for the tax years 2009/10 to 2013/14.
[11] On 13 March 2019 HMRC issued the PLN on the basis that WHL's failure to pay the NICs due was a result of the neglect of the appellant, the sole director at the relevant time. The amount claimed in the PLN of £301,941.10 is made up of the NICs which WHL had failed to pay to HMRC and interest thereon as set out below:
Date
NICs Due
£
NICs Paid
£
Unpaid NICs
£
Interest
£
Unpaid Contributions
£
2009/10
13,238.26
0
13,238.26
2,220.76
15,459.02
2010/11
82,230.25
0
82,230.25
11,327.50
93,557.75
2011/12
87,775.22
0
87,775.22
9,431.41
97,206.63
2012/13
77,347.37
11,129.34
66,218.03
5,147.24
71,361.27
2013/...
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Gary Wagstaff v The Commissioners of HM Revenue and Customs [2022] UKUT 00327 (TCC))
...[2022] UKUT 00327 (TCC)) Case Number: UT/2022/000012 UPPER TRIBUNAL (Tax and Chancery Chamber) The Royal Courts of Justice, Rolls Building, London National Insurance Contributions – Personal Liability Notice – company in creditors voluntary liquidation – was the company “liable to pay” NICs......