HMRC security notice set aside after director could not pay

On 28 October 2026, Judge Nigel Popplewell allowed the appeals of Crescendo Entertainment Ltd and its sole director, Yoram Jakob Ben-Israel, and set aside HMRC notices requiring security for PAYE and National Insurance. He found Officer Jennifer Harrison's decision unreasonable and disproportionate, and found that liquidation and the end of trading removed any need to protect future revenue.

What this means if you are a director is this. A security notice is not a bill for tax already owed. HMRC can demand a deposit, or other security, from the company and from you, jointly and severally, so it can seek the whole sum from either of you. The tribunal recorded that demand as £186,984.78. The headline parts it gave, £111,958.19 of PAYE and £75,026.60 of National Insurance, add up to one penny more. The detailed PAYE parts in the same judgment add to £111,958.18, which with the National Insurance figure matches the stated total. Do not correct that for them. If your notice does not add up, put the difference in the appeal.

The judge said the notice procedure was not intended to recover pre-existing PAYE or National Insurance debts, although arrears can be considered when an officer assesses risk. He rejected the argument that including arrears, by itself, made these notices unlawful. Setting a notice aside does not cancel the underlying tax, and it does not decide that you are personally liable for the company's tax. It removes this security demand, and the criminal exposure that attaches while a notice still stands.

Harrison issued the notices on 12 March 2025. A warning on 17 January 2025 had put a figure of £153,590.69 on the risk. The company's agent had told HMRC on 29 January that Ben-Israel was struggling to raise cash and that a time to pay arrangement would be required, and on 11 February that property sales were being pursued. Harrison knew the recipients were in financial difficulty. She knew failure to comply could be a criminal offence. She did not ask whether they could comply. The judge found that she knew both were unable to satisfy the notices, and that she had not considered ability to pay.

HMRC's representative argued that hardship or ability to pay did not have to be considered. That was HMRC's case. It is not what the judge held on these facts. He did not strike down every notice sent to a director in trouble. He said that, in his view, the security regime as a whole was proportionate, and that he did not need to decide that point. He decided this demand. A notice the recipient cannot meet gives the revenue no practical protection. He said the demand could not produce money that the recipients did not have. The protection is the security itself. If the officer knows it cannot be given, future PAYE is not secured. What the notice did here was put the director inside a criminal offence. The judge treated that consequence as inevitable, and as something that should not have been a purpose of the decision. The judgment records failure to comply with a PAYE security requirement as a strict liability offence.

That is the finding. The wider criticism is separate. HMRC then petitioned to wind the company up on 7 November 2025, for £88,457.36 of PAYE and National Insurance, less than the security demand. Judge Agnello KC made a compulsory winding-up order on 6 May 2026. Companies House lists Crescendo Entertainment Ltd, number 13506050, as in liquidation, and records the court order filed on 15 May 2026. The judge regarded the petition as a less onerous way for HMRC to protect revenue than the notices. Less onerous for HMRC is not costless for you, your staff or your creditors. The judgment does not establish that a way of keeping the business trading still existed when the petition went in. The company had seven employees when the notices were issued. Ben-Israel's unchallenged evidence was that he had put approximately £800,000 of his own money in, and that the business did not have the income to sustain itself.

Who gets paid, and in what order, if this goes formal is the question the judgment does not answer with a figure. In a compulsory liquidation in England and Wales, the expenses of the winding up, including the Official Receiver's fees, come out of the company's assets before unsecured creditors. Certain unpaid wages and holiday pay can rank as preferential. HMRC is a secondary preferential creditor for specified PAYE, National Insurance and similar debts, ahead of ordinary unsecured creditors. The Official Receiver told the tribunal it did not wish to continue the company's appeal. The judgment does not record a receipts and payments account, a remuneration report or a statement of affairs. An insolvency practitioner appointed in the liquidation may have fees from the estate. That is how the process is funded. It is not a finding that anyone profited improperly here, and the public record does not prove a sum either way. Creditors, potentially including HMRC, bear the shortfall. The director bears the personal demand, the criminal risk while a notice stands, and the money he has already put in.

After the winding up, HMRC told the tribunal that the debts had been written off and that it would not pursue Ben-Israel for security or prosecute him even if the appeals failed. The judge allowed both appeals anyway. A concession is not the same as the notice being set aside. HMRC's statement that these debts had been written off is a statement about this liquidation. It is not a rule that liquidation extinguishes every company debt, and it does not release a personal guarantee if you have given one. The judgment records no personal guarantee, no overdrawn director's loan account, no wrongful trading finding and no disqualification application against Ben-Israel. Those are separate risks. They are survivable if you deal with them early. This decision does not answer them.

The review did not repair the original decision. The recipients appealed to HMRC on 11 April 2025 and asked for a review. HMRC upheld the notices on 6 June 2025. The tribunal appeals were notified on 4 July. The judge found the original decision flawed even on a supervisory approach, which looks at what the officer knew at the time. He then applied the variation provisions, which allow the tribunal to confirm, vary or set aside a notice, and he took the later liquidation into account at that stage. He did not settle every argument about how wide that power is. What he did decide is the point that matters to you. On this evidence, failing to consider ability to pay made the notices unreasonable and disproportionate. That is not a promise that your case will end the same way.

There is no trading route left for this company. It has been wound up and has stopped. If you are still trading, formal insolvency is sometimes the right choice. It is not a sentence, and it is not the only door. A time to pay arrangement, a challenge to the notice, or a company voluntary arrangement (CVA) can keep a business going where the numbers work. A creditors' voluntary liquidation (CVL) stops it. Ask who is paid from that procedure before you agree to it. The PAYE security rules apply across the UK. Winding-up procedure differs in Scotland and Northern Ireland.

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