HMRC has the power to seek the recovery of National Insurance contributions (NICs) from an officer of the company personally if it believes the failure to pay is the result of fraud or neglect. In this case, an officer of a company is any director, manager, secretary or other similar officer, or any person purporting to act as such, and, where the members manage the company, any member exercising functions of management. HMRC treats a shadow director or de facto director as a person purporting to act as an officer. To recover the unpaid NICs from the company officer, a Personal Liability Notice (PLN) is issued. The notice states the unpaid contributions it covers, the sum the officer must pay with interest and, where HMRC holds more than one officer to blame, the share of the debt applied to this officer.
Which HMRC Department Issues PLNs?
Personal Liability Notices are issued by HMRC’s NIC Personal Liability Notice Team, part of Individuals and Small Business Compliance (ISBC), which carries out all PLN enquiries. As you would expect, such a specialist team will only issue PLNs where it believes they are enforceable. HMRC invites officers to answer its informal enquiries and make representations, but answering them is voluntary. Officers who choose to do so may be able to negotiate a settlement. Decisions made by the Personal Liability Notices Team can also be appealed to the Tax Tribunal.
When will PLNs be Issued?
The law allows HMRC to issue a PLN where the failure to pay National Insurance contributions appears to be due to an officer’s fraud or neglect. HMRC says it uses PLNs only for fraud or serious neglect, and any one or more of the following factors can point to that:
- There has been persistent failure to pay PAYE/NICs when other payments have been made on time;
- Company directors’ remuneration has continued to be paid during the period;
- The individual has been involved with other companies where NICs and other taxes have not been paid;
- The assets of an insolvent business which has run up significant tax debts (including PAYE arrears and NICs) are transferred to a new company run by the same individuals.
Need Advice?
Have you been contacted by HMRC’s Personal Liability Notice Team? Perhaps you have received a PLN and want to appeal the decision to the Tax Tribunal? Please call 0208 444 3400 for a no-obligation discussion of your circumstances.