Jurisdiction(s):
United Kingdom

Purkiss v Kennedy: tax mitigation not a prohibited purpose under Insolvency Act 1986 s 423; limits s 423 claims over EBT schemes (Court of Appeal, England and Wales)

Published on: 27 March 2025

Published by a LexisNexis Restructuring & Insolvency expert

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Article summary

Purkiss (as liquidator of Ethos Solutions Ltd) v Kennedy and others [2025] EWCA Civ 268

What are the practical implications of this case?

Insolvency office-holders confronted with disputed tax liabilities should scrutinise this ruling closely and consider the judgment carefully. In substance, it curtails the use of Insolvency Act 1986, section 423 proceedings against individuals who were attempting to reduce their tax burdens through avoidance. At paragraph [29], Lord Justice Newey observes that Parliament was unlikely to have intended section 423 to catch this form of “tax mitigation”, or to stretch that provision so far. Such mitigation, of the type identified by Lord Goff in Ensign Tankers, is not ordinarily regarded as improper within practice. As Lord Tomlin stated in IRC v Duke of Westminster [1936] AC 1 at 19, every person is entitled, if able, to arrange their affairs so that the tax payable under the relevant Acts is less than it might otherwise be. Likewise, in IRC v Brebner [1967] 2 AC 18 at 30, Lord Upjohn remarked that no sensible business person would complete a commercial deal other than on the basis of paying the minimum tax possible. In Hill, at paragraph 87, Arden LJ spoke of...

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