Current legislation demands that employers pay the PAYE and National Insurance Contributions due on an employer’s earnings to HMRC.

The consequence of failing to pay PAYE may result in HMRC send you a personal liability notice which transfers corporate liabiity to the recipient

Below, we’ll explain what these are, and how you might challenge one.

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What is a Personal Liability Notice (PLN)?

A personal liabilty notice (PLN) is a notice, issued by HM & Revenue (HMRC) which transfers a company’s liability for unpaid National Insurance contributions the recipient. PLN’s were introduced in 2009 to curb directors who routinely practiced phoenixism.

Initially introduced for NI Contributions and PAYE only, PLN’s are now used more broadly, including for payments made in preference.

When Might a Company Receive a Personal Liability Notice?

A company director will only receive a Personal Liability Notice for some of the following reasons:

  • If HMRC believes he or she has intentionally failed to pay the amount owed
  • Where HMRC feels there has been an attempt to commit fraud or some other serious offence.
  • Where the company has preferentially paid company particular creditors, connected parties or its own directors in preference to tax liabilities
  • Where company officers have a history of tax compliance failure with other companies
  • Where there is evidence or suspicion of a phoenix company created to escape tax liabilities from a former business

It’s not just the company directors who can be made personally liable for the unpaid contributions. Officers of the company, such as senior managers and shadow directors, can also be made to pay.

HMRC will usually only issue a PLN if it believes there is a good chance of recovering the debt.

Can you Challenge a Personal Liability Notice?

HMRC will consider any representations made by the officers of a company when issuing a Personal Liability Notice. Ideally, any negotiations with HMRC will take place before the notice has been issued. Once the PLN has been issued, it is then subject to an appeal process before the Tax Tribunal.

In most cases, HMRC will take a company’s representations into account and agree to a meeting.

At this point, if the company officers are willing take some of the responsibility, it is possible for a settlement to be negotiated. If the directors are not willing to accept responsibility and continue to dispute the notice, a negotiation can take place on the basis of securing a NIL settlement.

There is no statutory obligation to cooperate with a Personal Liability Notice enquiry. However, if you believe you have acted honestly and ethically, you will lose your opportunity to negotiate with HMRC if you fail to cooperate.

What if the Company is in Liquidation?

If a PLN decision is being made about a company in liquidation, HMRC will ask the liquidator or official receiver for the company’s books and records. It will then make its decision as to whether a Personal Liability Notice should be issued.