A winding up petition founded on a tax assessment, which is the subject of an appeal to the Tax Tribunal, should be dismissed or stayed pending the appeal.
HMRC presented a winding up petition against ENTA Technologies Limited (“ENTA”) founded on 36 unpaid VAT assessments. ENTA had appealed the assessments to the First-tier Tribunal (Tax Chamber). As a matter of law the mere existence of an assessment creates a statutory debt which remains extant unless and until any appeal to the tax tribunal is successful and the assessment is cancelled.
The petition was dismissed as an abuse of process and/or as a matter of discretion and the advertisement restrained.
The judge even went as far to suggest that “it would appear wrong [for HMRC to] present, let alone advertise, a petition before applying [to] the tribunal to strike out an existing appeal”. This is an important decision for taxpayers, which wrestles some tactical advantage back from HMRC. It is undoubtedly right that tax disputes should be adjudicated in the specialist tribunal and not, where there is a substantial dispute, in the context of winding up proceedings.