HMRC has statutory demand upheld against a guarantor

A solicitor who tried to have a judgment debt set aside has failed. Follett Stock LLP, a firm of solicitors in Cornwall entered into a time to pay agreement (TTPA) with HMRC to pay £600,000 in 24 monthly instalments of £25,000. HMRC accepted these terms under the condition that the firms two partners offered a personal guarantee covering the sum.

Defaulting on an agreement

The firm made one single payment of £25,000 before going into liquidation. HMRC then pursued the debt by issuing proceeding against the two guarantors, the partners then applied for this to be set aside but their application was rejected. The partners submitted a proposal for an IVA but this was again rejected by HMRC.

Clauses

The guarantee agreement in place included a clause prohibiting HMRC from enforcing the guarantee in bankruptcy proceedings. The clause did not, however prohibit HMRC pursuing the partners for bankruptcy proceedings for the judgment debt. The clause in the guarantee agreement and its wording and inclusions in this case allowed HMRC to pursue the judgment debt and the judge rejected the debtor’s arguments explaining that both parties were given legal advice and that a clause could have included a judgment debt provision with regards to enforcement

The impact on enforcement

When looking at guarantor agreements and clauses it is worthwhile looking at what the inclusions and exclusions are. In this case the interest and costs can be pursued by HMRC and these costs totalled over £125,000 altogether which it must be understood is money owed to the public purse. You can read the full judgment here.