H M Revenue and Customs v Hyde Industrial Holdings Ltd (2006)


The Social Security Administration Act 1992 s.117A did not deprive the court of jurisdiction to strike out a claim to recover national insurance contributions. An order striking out such proceedings had been properly made but in the circumstances the court had erred in refusing to reinstate the claim on the Revenue's application.


The appellant Revenue appealed against the striking out of its claim against the respondent company (H) for unpaid national insurance contributions and the refusal of its application to reinstate the claim. H had implemented a scheme that involved paying bonuses to directors and employees in the form of gold coins to avoid liability to national insurance contributions on the ground that such payment was "payment in kind" within the Social Security (Contributions) Regulations 1979 reg.19(1)(d). The Revenue took the view that H was liable for national insurance contributions on such payments and H appealed against that decision. Other companies had been involved in using the scheme, which had been marketed by accountants, and it had been agreed that the question of liability should be determined in a lead case. Pending the decision on liability by the Special Commissioners, the Revenue issued protective proceedings since proceedings for the recovery of contributions were subject to a six-year limitation period under the Limitation Act 1980 s.9(1). The proceedings had been adjourned pursuant to the Social Security Administration Act 1992 s.117A(5). The county court then made certain case management directions and the claim was struck out when the Revenue failed to comply with an unless order. The Revenue did not apply promptly for it to be reinstated and its application for reinstatement was dismissed under CPR r.3.9. The Revenue submitted that having regard to s.117A the court should not have struck out the proceedings and they should have been reinstated.


Section 117A did not deprive the court of jurisdiction to strike out, but its existence was a material factor in the exercise of the discretion. But for H's appeal and the fact that it was for another tribunal to determine liability, the claim would not have been outstanding. There had been no error in making the original striking out order: an unless order had been made and the Revenue had failed to comply with it. However, the application to reinstate the action should have been allowed. By then it was clear that it was very difficult to predict when the lead case would be heard by the Special Commissioners and also clear that H was content to await that decision. The Revenue had failed to apply promptly for relief from sanctions, but there was no prejudice from that whatever. The Revenue's explanation was unsatisfactory and orders of the court were to be complied with, but those factors had to be balanced against the fact that if the action remained struck out H would be relieved from liability for contributions of over £750,000 even if the decision on liability went against it. The claim was reinstated.

Appeal allowed.