Advocate Damian Molyneux reviews the recent Manx decision of Moorgate Industries UK Limited v Global Steel Holdings Limited (in Liquidation) (10 February 2026) (“Moorgate”) dealing with claims for English Crown debts in Manx insolvency cases.

The existence of priority debts in a liquidation can cause insolvency practitioners considerable issues in wrestling with their duties to the creditor base as a whole. The case of Moorgate in particular appears to have been a tricky one for its liquidators to navigate due to apparent conflict between secondary legislation and agreements entered into between the English and Manx governments.

Background

This case concerns a dispute in the liquidation of Global Steel Holdings Limited (GSHL) which was in liquidation. Moorgate Industries UK Limited (Moorgate) was one of the admitted creditors. The dispute centred on whether a hypothetical claim by His Majesty's Revenue and Customs (HMRC) would have preferential status in the liquidation of GSHL. The question arose after the liquidators sought a ruling on the priority status of this hypothetical claim which could affect the distribution to creditors, they having failed to pay an interim dividend by a set deadline.

The court needed to resolve the statutory conflict between Regulation 4(3) of the Recovery of Foreign Taxes Regulations 2021 and Article 27(5) of the Double Taxation Agreement (DTA), which governed the treatment of UK tax debts in the Isle of Man and as to which it was stated, by his Honor Judge of Appeal Cross KC "The former [the Regulations] appears to accord an English tax debt the same priority as a Manx tax debt, while the DTA appears explicitly to prohibit any such priority'.

The Parties’ Submissions

Moorgate argued that the conflict between the regulations and the DTA should be resolved in favour of protecting individual creditors, especially Moorgate, from potential prejudice.

The liquidators supported the view that the Isle of Man could, through its domestic legislation, grant more rights to foreign tax authorities (like HMRC) than those provided by the treaty.

The Deemster’s Decision

At first instance the Court sided with the joint liquidators and rejected Moorgate’s arguments. The issue of whether HMRC's claim would have preferential status was determined by the correct application of statutory interpretation and international law principles. In particular the Crown's preference (pursuant to Section 97 of the Income Tax Act 1970) should be interpreted to include HMRC as representing the Crown in the UK. Thus, despite the conflict between the Regulations and the DTA, the Court found that HMRC had priority over Moorgate’s claim. At paragraph 12 of the Appeal decision (see below) this was summarised by Judge of Appeal Cross KC thus:

“The Deemster came to the conclusion that so far as income tax was concerned he had "no doubt that "the Crown" means the reigning Monarch in right of the Isle of Man so that the relevant organ of the Isle of Man Government is entitled to that tax” However, he concluded that he agreed with the joint liquidators that it was ''probable that "the Crown" must be sensibly construed as meaning the Monarch as Head of State of the United Kingdom, entitling HMRC to lay claim to the relevant tax”.

At first instance the Court ordered costs in favour of the joint liquidators to be paid form the assets of GSHL.

The Appeal

Moorgate appealed the decision and the court ordered that HMRC and the Income Tax Division of the Isle of Man Government be notified and invited to participate. The result was that Isle of Man Treasury later proposed an amendment to the Regulations to resolve the conflict with the DTA. After the amendment was passed by Tynwald on 17 July 2025, it clarified that HMRC's claim would not have preferential status in GSHL's liquidation.

The Final Outcome

With the regulatory amendment addressing the conflict between the Regulations and the DTA, both Moorgate and the liquidators were satisfied that the issue had been resolved. As a result, the appeal was rendered irrelevant and was dismissed.

However, the issue of costs remained as to which Judge of Appeal Cross KC said at paragraphs 30 to 33, ordering that the costs of the appeal be paid out of the assets of GSHL:

“30. As to the question of who succeeded in the appeal, it now being withdrawn, I conclude that there was here no successful party or unsuccessful party in the matter of the appeal. I come to that conclusion for these reasons - I am more than satisfied that it was entirely appropriate for the appeal to have been brought. I am of the view that there is quite obviously some merit in the appeal. That is not to say the appeal would have been successful, far from it. But this was a case where leave would undoubtedly have been given as there was quite plainly an arguable case…”

“31. Importantly though, it was the fact of the appeal (and perhaps in combination with the actions of this court), which caused Treasury properly to visit the issue, something which, had they done in the first instance, this procedure would have been unnecessary. Without the catalyst that was the appeal procedure, then the matter would not have been resolved in Moorgate's favour. To that extent the appeal was successful…”

“33. I am further satisfied that no criticism can be made of either party to these proceedings. However, it seems to me that the general rule should not apply…”

The author of this article, Damian Molyneux, is a director of M&P Legal with substantial insolvency experience. He can be contacted via dpm@mplegal.im. This article does not constitute legal advice and specific advice should be sought for individual circumstances.

Back to top