A provisional liquidator may be appointed if the evidence justifies it even where the tax assessments upon which the winding up petition is based are under appeal.
P Limited was in dispute with HM Revenue & Customs over the amount of VAT it owed. HMRC had sent it assessments claiming approximately £10 million. P appealed these assessments to the First Tier Tax Tribunal. Before the FTT made a decision HMRC went ahead presented a petition to wind up P and requested the appointment of a provisional liquidator. The court appointed a provisional liquidator. At the hearing of the petition P argued a provisional liquidator should never have been appointed and HMRC should give an undertaking in damages backdated to the presentation of the petition.
The fact that the FTT was hearing P's appeal against the assessments did not mean the court had no jurisdiction to make an order appointing a provisional liquidator. It would review the evidence to see if the appeal was hopeless or not and act accordingly. P has been unable to produce to the court or HMRC the evidence needed to back its argument that the assessments were wrong despite many requests over a prolonged period. Finally there was ample evidence of P's likely insolvency. The provisional liquidation would be continued and in the circumstances HMRC would not be required to give any undertakings to P.
There have been conflicting cases on this issue. See our earlier update on the Enta case. Here the judge thought Enta was simply wrong. No doubt this subject will wind its way to the higher courts in due course. For now it looks as if HMRC can seek the appointment of provisional liquidators even where appeals are made against the petition debt to the FTT.