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HMRC v Millichap (Liquidator of Gloucester Foods Ltd) (2010)


Gloucester Foods Ltd (the company) went into creditors' voluntary liquidation on 7 October 2005.


M was appointed liquidator. In the statement of affairs delivered to the Registrar of Companies HMRC was shown as a creditor in the sum of £351,442. On 20 September 2006 M wrote to HMRC saying that the company had failed to reclaim input VAT totalling £175,974.25 for the period between June 2000 and November 2004. HMRC responded on 16 October 2006 by indicating that M would have to complete and submit a voluntary disclosure form. On 19 September 2007 M sent in the requisite form claiming £302,574, indicating that if the figure was acceptable it would be set-off against the VAT claim and the balance applied to the claim for PAYE and NIC. On an unknown date between 19 September 2007 and Christmas of that year, HMRC informed M that claims for repayment of input tax were restricted to the 3 years following the date of payment. There was then a period of silence until 24 April 2009 when M rejected HMRC's claim to the extent of £302,574. HMRC responded on 27 May 2009 apologising for the delay and indicating that it was considering counsel's opinion. There then followed further correspondence between 17 June 2009 and 3 September 2009 when M indicated that in the absence of an appeal by HMRC he would declare a final dividend. On 4 September 2009 HMRC applied for an extension of time to apply to reverse M's decision and for an order reversing or varying such decision.


Granting the application –

(1)     Adopting the language of Lewison J in Legal Equitable Securities plc (In Liquidation); Bella v Linton and Another [2010] EWHC 2046 (Ch), HMRC's delay in applying to the court was both justified and excusable. It was justified as the underlying issue involved an important point of law requiring longer than the 21-day appeal period to consider. It was excusable for that reason and also because the parties adopted a relaxed approach to responding to correspondence. There would be a grave injustice if HMRC were deprived of the opportunity of challenging M's decision. Any prejudice to him was minimal.

(2)     Under reg 29 of the Value Added Tax Regulations 1995 HMRC had, subject to the 3-year time bar, a discretion to accept a late claim for deduction of input tax with the result that until it was claimed and allowed there was no debt due at all from HMRC and hence no mutual debts for the operation of r 4.90 of the Insolvency Rules 1986.

(3)     Although r 4.90 was also capable of applying to 'mutual dealings', such dealings meant those which gave rise to commensurable cross-claims and here there were no such claims as the company had, for the reason set out in (2) above, no claim at all before it went into liquidation.

Chancery Division
Mr Registrar Jaques
Judgment date
30 July 2010

​[2011] BPIR 145