In Ducas Ltd, Enix Services Ltd and FL Capital Holdings Ltd v HMRC [2024] EHHC3132 the High Court (HC) granted HMRC the power to freeze assets for the three companies who are thought to be participants in fraudulent PAYE and NIC arrangements. 
HMRC believe Ducas Ltd (DL) are participating in serious fraudulent behavior in regard to unpaid employers’ National Insurance Contributions (NIC). The company had entered arrangements supplying agencies with health care workers for the NHS. HMRC calculated that the arrangements have led to an underpayment of class 1 NIC’s of around 171 million.
- DL entered into the arrangements with around 30,000 workers.
- A gross amount was paid by the NHS to the agency who then paid DL for the services supplied.
- DL’s contractual obligation was to be responsible for the PAYE and NIC, regardless of this the responsibility was passed onto an associated company, Enix Ltd (EL).
- The money paid by the NHS was paid with the assumption that the correct taxes and NI would be paid over to HMRC on behalf of the workers. EL paid the majority of the workers gross without deducting PAYE and NIC.
- HMRC claim falsification of payslips and Real Time Information (RTI) has also occurred.
The HC highlighted that although the figure of 171 million may differ in final findings, the estimated sum was justifiable at this point due to HMRC’s in depth investigation work.
Issues highlighted by the HC were:
- Assets held by DL were liquid and there was a risk of dissipation of these assets by DL.
- Numerous transactions had been made to the parent company FL Capital Ltd (FLCL) that appeared to have no commercial purpose. It was believed these transactions were the sums that should have been paid over to HMRC for NIC and PAYE.
- The agreements with the workers had deliberately been breached by DL when they entered financial arrangements with EL.
The HC relied upon the enforcement principle to freeze the assets of EL and FLCL. The enforcement principle allows assets of a third party to be frozen even though no claim has been raised against them.
The HC concluded:
- HMRC has a reasonable case and have provided satisfactory evidence that a freezing order should be granted.
- FLCL had been in receipt of funds that should have been paid over to HMRC for NIC and therefore the enforcement principle could be granted to freeze their assets.
- That EL were an ‘active participant’ in the arrangements.
- Exceptions were allowed in the case of EL to allow payments in the normal course of business to continue, payments to shareholders would not be allowed.
The HC granted the freezing order.
Clarification of the amount due will be determined through HMRC’s internal review system or via the First Tier Tribunal (FTT).
Useful guides on this topic
National Insurance Contributions
What are the current National Insurance rates? What rates will apply to next year?
Agency Workers: Employment Intermediaries Rules
What are the tax rules for Employment Intermediaries and Agencies? Are agency workers subject to PAYE?
Off Payroll Working: At a glance
What is Off-Payroll Working? What is IR35? What are the tax rules for Off-Payroll Working or IR35? How do you check employment status? What is a personal service company?
Associated Companies and Tests for Control
What is an associated company? What are the tax effects of associated companies? How do the control tests work? Examples of associated companies. What are the rules for indirect control?
External link
Ducas Ltd, Enix Services Ltd and FL Capital Holdings Ltd v HMRC [2024] EHHC3132
