Barriball & Anor v Jackson & Anor (Re HSJ Consultancy Ltd) [2026] EWHC 1135 (Ch)

Georgia Purnell (instructed by Wedlake Bell LLP) for the Applicants

ICC JUDGE MULLEN :

Introduction

• By an application sealed on 30th September 2024, Mr Simon Barriball and Ms Helen Whitehouse (“the Liquidators”), as joint liquidators of HSJ Consultancy Limited (“HSJ” or “the Company”), brought proceedings under section 212 of the Insolvency Act 1986 (“IA 1986”) against the Company’s directors, Mr Kim Jackson and Mr Robyn Hughes (“the Respondents”). The application was accompanied by a witness statement of Mr Barriball, dated 17th September 2024, and also by points of claim, which allege breaches of directors’ duties and seek equitable compensation, together with an account of benefits received by the Respondents in consequence of the breach of duties alleged.

• HSJ was incorporated on 9th September 2008 and carried on the business of accountants and taxation consultants. The Respondents, who were at the relevant times themselves chartered accountants, were directors of the Company from incorporation. As part of its business, the Company decided that it would introduce its clients to promoters of tax planning schemes. The Company itself also took part in tax avoidance schemes in 2010.

• The first of these was an employee benefit trust established under a deed of trust dated 2nd June 2010 (“the EBT”), which scheme was promoted by a company called C3 Partnership Limited (“C3”). This provided for payments to an offshore discretionary trust, the trustee of which was a Guernsey registered company called Bourse Trust Company Limited. The scheme allowed loans to be made from the trust to employees of the Company. These, if they were not treated as remuneration by HM Revenue and Customs (“HMRC”), would not be subject to “Pay As You Earn” income tax (“PAYE”) or National Insurance contributions (“NIC”). The Company contributed £150,000 to this scheme in June 2010.

• The second scheme was an employer financed retirement benefits scheme set up by a deed of trust dated 16th November 2010 (“the EFRBS”), which scheme was promoted by OneE Tax Limited (“OneE”). The trustee of the EFRBS was OneE Trustee Services Limited, registered in Cyprus. The scheme was designed to reduce HSJ’s corporation tax liability and payments made from the trust under this scheme, again by way of loan, were intended to be free of PAYE and NICs. £300,000 was paid to this scheme in November 2010.

• The Respondents almost immediately applied for loans from the schemes in each case. The EBT paid £68,250 to each of the Respondents, together with loans to other employees totalling £13,750. The EFRBS paid £160,000 to Mr Jackson and £140,000 to Mr Hughes. The Liquidators say that the Respondents directed the trustees of the schemes as to how the monies should be applied and that the loans that were consequently made were never to be repaid. It is not suggested that the loans have been called in in the intervening sixteen years. In other words the Liquidators’ case is that the operation of the schemes was entirely pre-ordained, with the monies being paid out of the scheme in accordance with the direction of the Respondents.

• HMRC opened enquiries into the Company’s 2010 tax return in 2011 and, over the following years, issued a number of statutory determinations of the Company’s liability to tax and NIC on the basis that the schemes were ineffective to reduce that liability. The Company ceased to trade in May 2012 and its business was transferred to a limited liability partnership (“the LLP”), a matter of months after HMRC opened its enquiry into the Company’s tax return for the year ending April 2010. The Respondents say that they did not intend to abandon the Company but simply adopted the partnership structure with a view to succession planning for their retirement. Nonetheless, they applied to strike HSJ off the register of companies in 2013. Strike-off action was suspended, probably as a result of an objection from HMRC.

• HMRC made proposals for the settlement of what it claimed were HSJ’s liabilities in respect of the EFRBS in 2013 and issued notices in 2014 for liabilities of more than £250,000 in respect of corporation tax, PAYE and NIC. An accelerated payment notice (“APN”) was issued in March 2015 for £92,582.38, which was reduced following representations to £78,391.14 on 17th June 2016. It appears that HSJ was a claimant in a judicial review organised by OneE,[1] which, according to the correspondence in the bundle, led to an interim order preventing HMRC from enforcing the APN. Those judicial review proceedings were ultimately unsuccessful in the High Court and in the Court of Appeal[2] and it is to be inferred that the APN became enforceable.

• The Respondents approached the Liquidators’ firm and HSJ went into creditors’ voluntary liquidation on 29th March 2016. The statement of affairs prepared for the liquidation set out trade creditors of £500 and the debt to HMRC, which was said to be disputed, was set out at £1, with the notes to the statement of affairs recording that the claimed sum was £165,912.70.

• HMRC’s most recent proof of debt in the liquidation in 2023 claimed £574,453.79, which included £171,938.11 in unpaid corporation tax for the year ended 30th April 2011, £154,940.56 under a Regulation 80 determination pending appeal dated 5th April 2011, £105,912.70 under a Regulation 80 determination for income Tax for the period 6th April 2010 to 5th April 2011 and £83,727.33 under a Regulation 80 determination for income tax and NICs for the period 6th April 2009 to 5th April 2010. The status of the appeal is unclear.

• The Liquidators now say that the Company was insolvent at the time of entry into the schemes, or was rendered insolvent by entry into them, and the Respondents were in breach of their duty as directors under section 172 of the Companies Act 2006 (“CA 2006”) in, among other things:

i) failing to take advice as to the schemes;

ii) failing to consider the interests of creditors in entering into the scheme;

iii) failing to consider the possibility that the schemes might not have the desired tax consequences and maintain a “responsible reserve” to meet the liability to HMRC;

iv) failing to consider the interests of creditors in causing the Company to enter into the schemes at a time when it was insolvent; and

v) failing to cause the Company to account for the tax due to HMRC.

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