Overview Limitation Period For Creditors In A Liquidation
The limitation period for creditors in a Liquidation in effect ceases to run.
Limitation Period
A limitation period is typically set by the Limitation Act 1980.
Whilst there are various exceptions matters of contract and an action giving rise to a claim from statutory provisions has a limitation period of six years.
Liquidation
When a company goes into Liquidation the assets and property of the company are to be applied in satisfaction of its liabilities at the date of commencement of Liquidation. Creditors may submit and prove their claim at a later date except if the last proving date has passed.
Limitation And The Effect Of Liquidation
The effect of Liquidation on a Limitation period was that it is stopped. In Financial Services Compensation Scheme Limited v Larnell Insurances) Limited [2005] EWCA Civ 1408 the following was explained:
In effect, so far as the operation of the winding-up is concerned, limitation periods cease to run at that date [the commencement of the winding-up]
Once a company goes into Liquidation if a claim is still in time at the date the winding up has commenced, it can still be accepted even if it is proved after the limitation period might otherwise have expired were it not for the Liquidation having commenced.
In the case re General Rolling Stock Company (1872) LR 7 Ch App 646 the following was said:
In these cases the rule is that everybody who had a subsisting claim at the time of the adjudication, the insolvency, the creation of the trust for creditors, or the administration decree, as the case may be, is entitled to participate in the assets, and that the Statute of Limitations does not run against this claim, but, as long as assets remain unadministered he is at liberty to come in and prove his claim, not disturbing any former dividend.”
Limitation Period For A HMRC Personal Liability Notice In A Liquidation
The limitation period for an HMRC Personal Liability Notice does not continue to run in a Liquidation.
Once a company has gone into insolvent Liquidation the liability of the company to pay HMRC tax debts is the same at the commencement of Liquidation as at the date the Personal Liability Notice is issued.
This point was highlighted in the case of Gary Wagstaff v Revenue and Customs [2022] UKUT 327 (TCC):
It remained liable to pay the NICs after it went into CVL but such liability would inevitably be administered within the liquidation and HMRC may receive no dividend in respect of it. It makes no sense to us to say that WHL is liable to pay for one purpose but not for another, and that a limitation period is running in the background despite the CVL and the General Rolling Stock principle. The fact that WHL would have no limitation defence to a claim brought by HMRC shows that it remained liable to pay the NICs even after the limitation period would otherwise have expired and it is irrelevant that the liability would be valued as at the date of liquidation rather than any later date.
38. Therefore, when the PLN was issued on 13 March 2019, WHL was liable to pay HMRC its unpaid liabilities in respect of NICs. That liability was the same as the unpaid liability in respect of NICs which existed on 20 November 2015 when WHL entered CVL (and in respect of which HMRC submitted a proof of debt in October 2016). It was the same liability and it continued to exist on 13 March 2019 and beyond.
The Effect Of Dissolution
However, it is worth noting the effect of the dissolution of a company on HMRC’s ability to issue a Personal Liability Notice. Once the company is dissolved after Liquidation it is no longer liable to pay the HMRC debt so a Personal Liability Notice could not be issued by HMRC.
