Personal Liability Notice Against Company Directors
Expert Legal Advice for Directors Facing HMRC Personal Liability Notices
- to challenge a Personal Liability Notice issued by HMRC,
- to respond to requests for information in ongoing HMRC investigations,
- tactical advice on the HMRC review and appeal process,
- representation in appeal proceedings before the Tax Tribunal.
Challenging a Personal Liability Notice Issued by HMRC
Receiving a Personal Liability Notice does not prevent HMRC's decision from being challenged. Depending upon the facts and circumstances of the case, it may be possible to seek a review of the decision or pursue an appeal before the Tax Tribunal.
Given the relevant time limits, it is important that legal advice is obtained at an early stage.
Personal liability of company officers
A company is a separate legal entity, independent from its officers, and is responsible for its own actions, debts and liabilities.
Historically, this ‘corporate veil’ has protected company officers from personal liability when a company defaults on its obligations. However, such protection can be ‘pierced’ by the courts seeking to hold company officers personally accountable for the company's failures.
Company officers can include:
- Directors,
- Company secretaries,
- Managers, or
- person acting as company officers without formal appointment, such as ‘shadow’ directors
In cases where a company fails to pay certain tax debts or penalties, HMRC may seek recovery from the company officers by issuing a:
- Personal Liability Notice (PLN)
- Joint Liability Notice (JLN)
In addition, where a company is insolvent, HMRC, as a creditor, may pursue company officers through separate insolvency proceedings or other legal claims designed to recover losses or challenge a director's conduct. For further information, please see: Insolvency Claims against Directors.
Comprehensive Legal Support
If you are subject to an HMRC investigation, involved in a tax dispute or have received a Personal Liability Notice, it is essential to understand the issues raised by HMRC, your legal position and the potential financial implications.
Successfully challenging a Personal Liability Notice requires careful preparation, a thorough understanding of the relevant legislation and detailed scrutiny of the evidence relied upon by HMRC. Our solicitors advise and represent clients throughout the statutory review and appeal process, including proceedings before the Tax Tribunal.
Whether you require representation before a Notice is issued or wish to challenge a Notice that has already been served, our experienced tax disputes solicitors will prepare robust representations and provide strategic legal advice and support throughout the process.
Contact us in confidence for an initial consultation. Our experienced HMRC and tax disputes solicitors will provide clear, strategic advice tailored to your circumstances and objectives.
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What is a HMRC Personal liability Notice?
The effect of a HMRC Personal Liability Notice (PLN) is to transfer liability to one or more of a company’s officers thereby making them personally liable.
The issue of a PLN
Prior to the issue of a PLN, HMRC will normally conduct enquiries to ascertain the reasons for the failure to pay the company’s liabilities focusing on the:
- time of the default,
- amount due and how it arose,
- views of those managing the company,
- evidence of any previous history of wrong doing.
Company Officers will have the opportunity to respond.
How can KANGS help?
Our team of specialist tax solicitors provide the following services:
- Initial Consultation and Legal Advice: Confidential consultation to discuss the case details, provide an initial assessment and advise on legal rights and options.
- Advice on the complex Review and Appeal process that HMRC adopts in relation to Personal Liability Notice cases.
- Tactical advice and guidance on any representations to be made to HMRC in advance of any formal Appeal process.
- Representation throughout the Appeal process to include proceedings before the Tax Tribunal.
Contact KANGS
The expert lawyers at KANGS are available to assist you. We can arrange initial consultations in person, by video call or telephone.
Please contact one of our experts listed below or contact us at:
What is a Joint Liability Notice?
HMRC issues a Joint Liability Notice (JLN) to each company officer who shares responsibility for a company’s specific obligation or debt. This notice outlines the terms of the liability, the total amount owed and the consequences of not fulfilling the obligation.
The notice is typically issued where individuals have shared responsibilities in a company that has been assessed for a tax liability by HMRC, resulting in their personal liability for part of the company’s debt.
When are Joint Liability Notices issued?
A JLN will be issued to each defaulting company officer when HMRC forms the view that the company:
- evaded tax or engaged in evasive conduct,
- is insolvent or likely to become insolvent,
- was either:
-
- responsible for the evasive conduct or received a benefit from the evasion, or
- participated in or facilitated the conduct,
- has a tax liability arising from the evasive conduct, and
- tax liability, arising from the conduct, will probably not be paid.
For which tax liabilities will a Personal liability Notice be issued?
There are two main types of PLN, one covering National Insurance Contributions (‘NICs’) and the other relating to penalties imposed relating to VAT debt.
A PLN cannot be used for recovering VAT, Corporation Tax or any other taxes.
When will HMRC issue a Personal liability Notice for NICs?
HMRC will exercise its powers when it believes tax has been evaded as the result of fraud or neglect.
NICs are required to be deducted from an employee’s pay as part of PAYE and paid to HMRC directly by the employer. Where the employer fails to pay NICs, and HMRC believes this was due to a neglect of duty or fraud, it will hold the responsible officer(s) personally liable.
Neglect is not specifically defined, but the definition in Blyth v Birmingham Waterworks (1856) 11 Exch 781 is informative:
‘Negligence is the omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs, would do, or doing something which a prudent and reasonable man would not do. The defendants might be liable for negligence, if, unintentionally, they omitted to do that which a reasonable person would have done or did that which a person taking reasonable precautions would not have done.’
Accordingly, it can be assumed that where a reasonable officer of a company would have paid NICs in the relevant circumstances, HMRC will seek to hold the defaulting officer(s) liable.
- HMRC has confirmed that it will only issue a PLN for serious neglect, such as where:
- there exists prolonged non-payment of NICs,
- payments are made to other creditors, but not HMRC,
- payments due to HMRC are used to support company cashflow,
- a company is insolvent,
This list is not exhaustive and only provides some of the considerations HMRC will make to assess the severity of a company officer’s neglect.
Fraud arises from deliberate dishonest conduct which HMRC will seek to punish, particularly where a personal benefit is obtained by one or more company officers.
When will HMRC issue a Personal liability Notice for VAT penalties?
Company officers may be made personally liable for VAT penalties where HMRC believes there has been deliberate wrongdoing attributable to the company officer(s) in question.
The amount claimed in a PLN must be based on the original VAT Penalty issued to the Company and it cannot exceed this amount. Where a PLN is issued to more than one company officer, the combined value apportioned between the company officers must not exceed the original VAT Penalty issued to the Company.
It is common to see that a PLN for a VAT penalty will be served on the company officer at the same time or shortly after the company has received a VAT Assessment based on the Kittel Principle.
Can a Personal liability Notice be given in circumstances other than NIC and VAT penalty debt?
Yes, a PLN can be given for a deliberate:
- inaccuracy provided in a Tax Return or any document, and
- failure to notify HMRC of any pertinent change in liability to tax.
Who Can I Contact For Advice & Help?
It is imperative that you instruct experienced tax dispute solicitors as soon as you become aware of the prospect of a PLN being issued by HMRC.
Our team can provide legal advice and guidance on the appropriate representations to make to HMRC as well as guide you through the complex appeal process. A strict time limit is applied to such matters by HMRC and therefore it is essential that you seek legal advice as soon as possible.
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