In Spring Salmon & Seafood Limited v HMRC the Upper Tribunal (UT) held that HMRC were prevented from assessing PAYE and NICs due to a previous undertaking they had given to the company.

  • The company was incorporated in 1998 and ceased to trade in 2005.
  • Accruals for wages and salaries and for a bonus to be paid to the director and his brother were included in the cessation accounts.
  • No PAYE or NICs were accounted for on these, and they were not included in the tax returns of the director or his brother.
  • HMRC opened enquiries into the company’s tax returns and the personal tax returns of the director and his brother.
  • As part of the closure proceedings in 2007 the company claimed that it entered into a binding agreement with HMRC that no PAYE or NICS would be demanded.
  • The company was struck off the register and dissolved in 2007, but on the application of HMRC was restored with retrospective effect in 2010.
  • At that time HMRC provided an undertaking to the court that it would issue closure notices on outstanding enquiries and not raise any further assessments.
  • In 2011 HMRC issued PAYE notices of determination and NIC decisions on the bonus and salaries.

The UT accepted that the exchanges in 2007 did form a binding agreement.  The fact that HMRC were awaiting more information did not prevent this from being the case. 

However, that agreement was subject to the condition that no deduction would be claimed for the bonus.  This was subsequently broken as a connected company which succeeded to the trade is claiming a loss including that deduction.  The UT therefore held that the 2007 agreement did not prevent HMRC from charging PAYE and NICs.

On the 2010 undertaking, the UT held that the fact that this was given to the Court and not the company was irrelevant: it could still be relied upon by the company.

In particular, the reference to not raising any further assessments was critical.  The UT rejected HMRC’s argument this referred only to corporation tax and not PAYE and NICs.  The clear intention was for existing enquiries to be brought to a conclusion and then that would be that. 

HMRC were therefore prevented from charging PAYE and NIC on the basis of the 2010 undertaking, and the taxpayer’s appeal was allowed.


This is an interesting case as the UT found that one agreement / undertaking with HMRC didn’t preclude them from pursuing tax but a later one did.  The key distinction was the actions of the taxpayer’s successor company, which prevented them from relying on the earlier undertaking.

Where clients enter into similar agreements with HMRC care should therefore be taken that they (or a related party) don’t subsequently do something which will render them useless.


Case reference: Spring Salmon & Seafood Limited v HMRC [2016] UKUT 0313  

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