The simple answer to this question is that HMRC may request a Personal Liability Notice for both directors and shareholders depending on what is appropriate in the particular circumstances of the company about which the Personal Liability Notice is being issued.
HMRC are allowed to issue a Personal Liability Notice to any “culpable officer” of the company. A culpable officer can be a director, a shareholder, company secretary or shadow director depending on the particular circumstances.
The individual has to have been an officer of the company at the time the unpaid National Insurance Contributions for which the Personal Liability Notice is being issued became due. Alternatively, HMRC can pursue the officer if they think that the failure to pay the National Insurance Contributions was due to the fraudulent or negligent behaviour of that individual.
The legislation defines the word officer as:
- A director, manager, secretary or similar officer of the company and any person purporting to act as such (for example, a shadow director)
- Where the company is managed by its members, any member exercising management functions.
HMRC will usually issue a Personal Liability Notice to a director or a company secretary, but as you can see above, they can issue them to someone who isn’t a director or a secretary, including a shareholder of the company.
The legislation is deliberately broad to ensure that those who aren’t formally appointed as directors can’t escape being held personally liable for unpaid company National Insurance Contributions where they are responsible for the non-payment.
The three situations where a person other than a director or secretary could be considered for a Personal Liability Notice are generally when the person managed or substantially managed the company’s affairs, where a person instructed or heavily influenced the decisions of the directors or where a person acts as a shadow director.
Shadow directors are people who are not formally appointed as a director but who act in the role of a director of the company. Their decisions direct or control the company. Where someone is acting as a shadow director, they will be held to be an officer of the company and could be the subject of a Personal Liability Notice should their behaviour warrant it.
Managers are interpreted to mean a person who either has the management of the whole affairs of the company, or a person holding a post within the company that puts them in a position where they are managing affairs of the company’s benefit.
It’s clear that most companies will have someone who would fall into the definition of a manager, so this is not a problem in and of itself. It’s only when the behaviour of the manager is fraudulent or negligent and that behaviour results in the non-payment of the National Insurance Contributions for which the Personal Liability Notice is being issued that HMRC will pursue a manager.
If a shareholder is acting as a manager and is responsible for the non-payment of National Insurance Contributions, HMRC can issue a Personal Liability Notice to them. It’s much more common for the person who is responsible for being a director or company secretary, but as long as they fall within the definition of “officer” set out above, any person can potentially be issued with a Personal Liability Notice.
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