HMRC Disputes

What is it?

HMRC have the legislative power to issue Personal Liability Notices (PLNs) under certain circumstances which allows them to transfer a company liability of VAT, NICs or PAYE to a director, making them personally liable for the debt. This legislation was enacted to avoid the historic position of individuals liquidating a company with the intention of avoiding tax liabilities that had accrued during trading.

The main reasons HMRC will seek to transfer the liability to the directors are:

• The failure to pay the tax liability was due to serious neglect or fraud
• The tax liabilities have not been paid on time on a regular basis
• Payments are made to connected parties or directors instead of clearing tax liabilities
• Officers of the company have previously used “phoenix” companies to avoid tax liabilities (i.e. following an insolvency the same people conduct the same business with the same personnel but under a new company).

If the company has demonstrably made every attempt to pay their tax liabilities, HMRC shouldn’t issue a PLN, although we do quite routinely see them do so.

What is the problem

Should a director receive one of these notices, urgent action needs to be taken to ensure that the liability is not wholly transferred to them personally. From our recent experience HMRC have become increasingly “trigger happy” in seeking to transfer PAYE/NIC and VAT liabilities to individual directors where a business has become insolvent.

In many cases HMRC have acted outside the letter and the intention of the legislation to use this technique to transfer the company liability on to the directors, and such instances are capable of successful challenge.

In our view the incorrect issue of notices is predominantly attributable to HMRC caseworkers receiving significant amounts of pressure from senior management to hit their internal targets. This means that their caseworkers are a lot less willing to take a pragmatic approach, which is why it is essential to seek early professional advice on such matters.

How can we help

Such attempts by HMRC to transfer liabilities should always be resisted, and we have had substantial success in this area. In particular, and amongst other factors, we consider:

• Whether HMRC’s approach is lawful with regard to the legislation
• Whether HMRC have complied with time limits with regard to the issue of determinations and directions
• Whether HMRC are seeking to use the legislation unreasonably or inappropriately
• Whether HMRC are acting outside of the intentions of the legislation

We have found that taking a proactive stance on such matters in advance of HMRC issuing the PLN allows us to have significantly more engagement with HMRC.

If you have received a notice we have various tools at our disposal which we can use to try and bring matters to a swift resolution. Examples include general negotiations, Alternate Dispute Resolution (ADR) or an appeal to the Tax Tribunal – which is far less expensive than you might think.

If you or one of your clients have received PLNs or think that they might be imminent and would like to discuss the matter, for a confidential no obligation chat please please call 01757 630010 or email info@independent-tax.co.uk.