High Court clarifies creditor rights in DG Resources Ltd v HMRC winding-up dispute

The High Court's judgement in DG Resources Ltd v The Commissioners for HMRC, handed down on 27 August 2025, provides significant clarity on corporate insolvency proceedings and creditor-debtor dynamics. The case involved two applications by DG Resources Ltd: seeking to restrain HMRC from pursuing a winding-up petition and attempting to strike out HMRC's existing petition concerning an alleged debt of £1,104,015.14.

DG Resources Ltd contended it possessed legitimate defences through a trading loss qualifying for tax rebate and an assignment claim against HMRC purportedly exceeding the petition debt. However, the court's analysis revealed fundamental weaknesses in both grounds of opposition.

Procedural developments and third-party involvement

The dispute's chronology commenced in May 2024 when HMRC issued a statutory demand, explicitly threatening winding-up proceedings for non-compliance. Despite the prescribed period expiring, HMRC initially refrained from filing the petition. Subsequently, in October 2024, DG Resources Ltd engaged Liberty, a consultancy firm, to handle tax negotiations with HMRC.

The involvement of Liberty proved significant to the proceedings, as their communications with HMRC became central to the dispute. The precise nature and authority of Liberty's representations on behalf of DG Resources Ltd emerged as a contentious issue, highlighting the importance of clear agency relationships in tax matters.

Service requirements under the Insolvency Rules

A substantial portion of the proceedings focused on whether DG Resources Ltd had received proper notification of the winding-up petition in accordance with the Insolvency Rules. The company challenged service validity, particularly following an administrative change from its actual trading address to a default registered address.

The court conducted a thorough examination of statutory service requirements under the Companies Act, ultimately determining that service had been executed properly. Judge Briggs emphasised that valid service could occur not only upon company officers but also upon individuals acknowledging authority to accept service on the company's behalf. This finding reinforces established principles whilst clarifying practical application in circumstances involving address changes.

Cross-claim assessment and evidential standards

DG Resources Ltd's assertion of substantial cross-claims against HMRC, including significant tax rebates allegedly arising from trading losses, faced rigorous judicial scrutiny. The court found that the company had failed to provide compelling evidence substantiating these claims, rendering them insufficient to establish a genuine cross-claim capable of offsetting the petition debt.

This aspect of the judgement underscores the evidential burden required when advancing cross-claims in winding-up proceedings, demonstrating that mere assertions without adequate supporting documentation will not suffice to defeat creditor petitions.

Judicial determination and wider implications

Judge Briggs concluded that HMRC's petition satisfied both service requirements and prescribed timelines. Consequently, he ordered the discharge of the injunction that had temporarily restrained HMRC from advertising the petition, thereby restoring the creditor's procedural rights.

The judgement reinforces HMRC's position as a formidable creditor whilst illuminating critical procedural aspects of corporate insolvency law. The ruling emphasises the necessity for companies to maintain accurate registered addresses and establish clear communication protocols with tax authorities. Additionally, it clarifies that companies seeking to oppose winding-up petitions through cross-claims must present substantial evidence rather than unsupported assertions.

The decision serves as a valuable precedent regarding service requirements in insolvency proceedings and the standards required for establishing genuine cross-claims against petitioning creditors, particularly where HMRC is concerned.

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