Piercing the Corporate Veil: Personal Liability Notices

For many years, HMRC has been able to pierce the corporate veil and make a company officer personally liable for company liabilities. HMRC can do this by issuing a Personal Liability Notice (PLN) – beware, as the number of PLNs is on the rise!

A ‘company officer’ can be a director, secretary, or any other person carrying out management functions for the company.

What is a Personal Liability Notice?

There are different types of PLN and each has a slightly different set of conditions to consider:

Company Penalties

HMRC can make a director personally liable to pay part, or all, of a company’s penalty for a deliberate inaccuracy, failure to notify or wrongdoing. HMRC will need to show that the inaccuracy, failure, or wrongdoing was attributable to the officer, and that:

• the officer gained, or attempted to gain, personally from the offence, or
• the company is, or is likely, to become insolvent.

We frequently see situations where HMRC has issued a PLN to a director after a deliberate penalty has been issued to a company following a tax enquiry.

National Insurance Contributions

HMRC can issue a PLN in situations where National Insurance Contributions (NICs) have not been paid over to HMRC. In these cases, HMRC will have to demonstrate that the failure to pay NICs was attributable to the fraudulent behaviour or serious neglect of a company officer.

These PLNs are typically issued where the contributions due to HMRC were knowingly and deliberately withheld or there is suspected phonexism.

Transactions connected with fraud

HMRC can make an officer personally liable to pay a VAT penalty when HMRC alleges that an officer knew, or should have known, that company transactions were connected with fraud.

These PLNs are issued where a fraud, typically a VAT fraud, has been identified elsewhere in the supply chain.

What should I do if I receive a PLN?

Urgent action is required to defend a PLN, as there are strict time limits to appeal.

The conditions required to issue a PLN vary depending on the type of PLN being considered. We can help you review your unique circumstances and determine whether HMRC’s actions are lawful and whether the correct processes have been followed.

It is always best to take action sooner, rather than later. Whenever HMRC alleges that there has been a fraud, for example at the start of a Code of Practice 9 (COP9) investigation, it is crucial to consider what the personal implications are for the individuals involved.

If you have received a PLN, or HMRC has alleged that there has been a fraud, and you would like to discuss your situation with our experienced team, please feel free to give us a call. We have successfully defended PLNs across a range of taxes.

Our next article will cover Joint and Several Liability Notices. These are HMRC’s latest weapon to tackle tax avoidance and evasion, so it is important to be aware of them.

You can get in touch with our friendly and experienced team on: 0203 675 8122 or email jeremy.johnson@intaxltd.com.

InTAX is a specialist tax disputes firm. We deal with disclosures, investigations, and tax enquiries of all descriptions, including COP9, fraud investigations, VAT fraud, tax avoidance, let property disclosures and tribunal appeals. But we don’t just deal with the serious end of tax investigations; we are also happy to handle smaller enquiries, disputes and problems that can be equally as worrying for our clients.