How is a Personal Liability Notice Calculated?
Personal Liability Notices are used by HMRC to recoup a company’s unpaid National Insurance Contribution liabilities from officers of the company who are culpable for the company’s non-payment of tax. How HMRC will calculate the sum demanded under a Personal Liability Notice from any one individual officer will depend on some factors.
What’s In a Personal Liability Notice?
A Personal Liability Notice will specify:
- The amount of those National Insurance Contributions for which that officer is being held personally liable;
- the amount of penalties and interest about the unpaid contributions for which they are also liable;
- the statutory interest that will apply to the debt from the date of the Personal Liability Notice’s issue.
The Amount of the National Insurance Contribution Debt
The first stage that HMRC will look at when calculating the debt is the amount of unpaid National Insurance Contributions that are owed by the company, along with any interest and penalties that are due on those amounts.
The HMRC Investigation
HMRC will then seek to identify who the culpable officer or officers are. The culpable officers are the officers of the company whose fraudulent or negligent behaviour lead to the company’s non-payment of its National Insurance Contributions.
To establish who the culpable officers are, HMRC will conduct an investigation into the company and its officers. The investigation will seek to find out why the National Insurance Contributions weren’t paid and to identify which of the officers were responsible for the non-payment. Once they’ve established which officers are responsible for the non-payment, they also need to prove that each officer’s behaviour was either fraudulent or negligent.
Calculating Payments Due from Each Culpable Officer
If there is one culpable officer, HMRC will require them to pay the full amount of the company’s outstanding National Insurance Contributions, and this will be the amount contained in the Personal Liability Notice (plus penalties and interest).
Where there is more than one culpable officer, the investigation should give HMRC the information it needs to assess to what degree the actions of each culpable officer led to the non-payment of the National Insurance Contributions. HMRC will apportion a number of outstanding contributions between the culpable officers by this information.
Reduction of Amount Due from Culpable Officers
If the company (or a liquidator) pays any amount of the outstanding National Insurance Contributions, HMRC will deduct this from the amounts due from the culpable officers. If the company pays the full amount, the officers will no longer be liable for the debt at all. If the company pays a proportion of the amount, an updated Personal Liability Notice will be sent to the culpable officers with a reduced amount.
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Author: Mike Smith