Personal Liability Notices (PLNs)

What is a Personal Liability Notice (PLN)?

A Personal Liability Notice (PLN) is a tool used by HM Revenue and Customs (HMRC) to hold directors or officers personally accountable for the unpaid National Insurance contributions of their company.

Section 121C of the Social Security Administration Act 1992 gives HM Revenue and Customs (HMRC) the authority to issue PLNs to company officers (typically directors) where non-payment of National Insurance contributions is due to fraud or negligence.

This measure is employed particularly when fraud or neglect has occurred in the management of a company’s tax affairs. By issuing a PLN, HMRC aims to combat non-compliance and ensure that directors cannot evade their company’s financial responsibilities by hiding behind the corporate veil.

When are PLNs issued?

Personal Liability Notices are issued when HMRC believes that the non-payment of National Insurance contributions is due to fraud or serious neglect by the company’s directors or other officers.

Dealing with HMRC Debts

If your company is unable to meet its tax liabilities, including National Insurance, you should take proactive steps. Engaging with HMRC at the earliest opportunity is advisable.

HMRC offers various arrangements that can help companies manage their dues effectively, such as Time to Pay arrangements, which allow businesses to spread their debt over an agreed period in manageable instalments.

It’s important for directors to understand that handling HMRC debts promptly and transparently can prevent the escalation of the situation to the point where a PLN might be issued.

Who Receives PLNs?

Personal Liability Notices are specifically directed at directors, company officers, and sometimes, shadow directors.

HMRC assesses the conduct of these officers in detail before deciding to issue a PLN, considering factors such as the extent of the non-compliance, the individual’s role in financial decision-making, and any previous history of similar offences.

Consequences of Receiving a PLN

Receiving a Personal Liability Notice (PLN) is a serious matter with substantial implications. Once a PLN is issued, the targeted individual becomes personally liable for the specified amount.

This liability can lead to enforcement actions similar to those used against individual debtors, including garnishment of wages, seizure of personal assets, or even bankruptcy proceedings if the debt remains unpaid. Furthermore, the presence of a PLN on an individual’s record can hinder their ability to serve as a director or to take executive roles in other companies, profoundly affecting their professional life.

Challenging a PLN

Challenging a Personal Liability Notice involves a formal process where the recipient disputes the grounds on which the PLN was issued.

Typically, this challenge must be grounded in proving either that there was no negligence or fraud, or that the individual was not responsible for the financial management that led to these failures.

Legal advice is highly recommended when considering a challenge, as the process can be complex and requires a thorough understanding of tax law and corporate governance. Successfully challenging a PLN can result in its withdrawal, thus relieving the individual of the associated liabilities and potential consequences.

Expert Advice

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