HMRC v Purity Limited: Public Interest Winding-Up Powers Put to Work
In HMRC v Purity Limited [2025] EWHC 3401 (Ch), the High Court confirmed the breadth of HMRC’s relatively new powers to wind up companies in the public interest, even where no traditional insolvency debt is relied upon. The case is the first successful petition under section 85 of the Finance Act 2022 and sends a clear signal to businesses operating at the margins of compliance.
Background
Purity Limited operated as an umbrella company for agency workers. While some workers were paid under conventional PAYE arrangements, the majority were engaged through a structure involving income advances and allocations designed to minimise PAYE and National Insurance liabilities.
HMRC considered Purity to be promoting tax avoidance arrangements and issued a winding-up petition on public interest grounds, rather than pursuing the usual debt-based insolvency route.
Before the substantive hearing, Purity entered creditors’ voluntary liquidation and did not actively contest the petition. HMRC nevertheless pursued a compulsory winding-up order.
The Legal Framework
Section 85 of the Finance Act 2022 allows HMRC to petition for winding up where it considers this “expedient in the public interest”, provided the court is satisfied that doing so is just and equitable.
Crucially, the provision does not require HMRC to prove:
that tax avoidance arrangements have definitively failed, or
that a loss to the public revenue has already crystallised.
The court’s role is to assess whether the company’s conduct justifies winding up as a matter of public interest.
Key Findings
The court granted HMRC’s application and ordered compulsory winding up, relying on three principal factors:
Detriment to the public revenue
HMRC had raised PAYE and NIC determinations which, following withdrawal of appeals, stood as valid liabilities. The company had no realistic prospect of meeting them.Lack of transparency and cooperation
Workers were given inconsistent and misleading explanations about the arrangements, and Purity obstructed HMRC enquiries.Continuation of discredited arrangements
The structure was effectively a continuation of schemes previously operated by another company that had already been investigated and liquidated.
The judge also held that compulsory winding up was appropriate despite the voluntary liquidation, as it enabled independent investigation and potential regulatory consequences, including director disqualification.
Why the Decision Matters
This judgment confirms HMRC’s public interest powers. The court does not need to wait for prolonged tax litigation or final determinations on the effectiveness of a scheme. Where conduct undermines confidence in the tax system, winding up may be justified.
What This Means for Businesses
For directors, founders, and advisers, this case carries several practical lessons:
1. Aggressive structures now carry corporate existential risk
Businesses promoting or relying on “clever” payroll, remuneration, or tax efficiency arrangements face more than back-tax exposure. The company itself can be shut down.
2. Voluntary liquidation is no shield
Entering liquidation will not necessarily prevent HMRC from pursuing compulsory winding up, particularly where public interest concerns remain.
3. Transparency and governance matter
Inconsistent explanations to stakeholders, poor record-keeping, or obstructive behaviour can significantly strengthen HMRC’s case.
4. Early legal advice is critical
Once HMRC views a business as a promoter or facilitator of avoidance, the focus can shift rapidly from enquiry to enforcement. Strategic advice at an early stage can be decisive in avoiding escalation.
Speak to a Solicitor today
If you require any assistance or would like to find out your options regarding winding-up proceedings or litigation, in general please contact us by sending an email to info@lyoncroft.co.uk, calling us on 020 3576 7170, or complete a contact-us form. Our offices are in Park Royal, London and you can find our address at the bottom of the page.
This article has been authored by Abdullah Suker, Managing Director of Lyon Croft Law.
