An intention to avoid incurring a tax liability is not a prohibited purpose under section 423(3) of the Insolvency Act 1986 (Purkiss (as liquidator of Ethos Solutions Ltd) v Kennedy)
Restructuring & Insolvency analysis: In this appeal, the Court of Appeal was asked whether an intention to avoid incurring a tax liability to HMRC was a prohibited purpose under section 423(3) of the Insolvency Act 1986 (IA 1986). The Court of Appeal held that it was not a prohibited purpose because, in short, seeking to avoid a liability from occurring in the first place will not prejudice a potential creditor within the meaning of IA 1986, s 423. Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate legislation is less than it otherwise would be. Written by Ben Rutledge, associate, and Nathan Tidd, paralegal, at Keidan Harrison LLP who acted for the successful respondents.