“Robbing Peter to pay Paul” can undo the protection offered by limited liability status and result in personal liability on both a criminal and civil level.
Stringent economic conditions can make it tempting to “slow down” on payments due to HMRC in favour of suppliers and other creditors. That way can lead to danger.
HMRC have the power to issue Personal Liability Notices (“PLNs”) against a director or officer of a company where HMRC consider that non-payment of sums due to them are as a result of neglect or fraud. There is an increasingly common perception that HMRC are raising the frequency of the issue of PLNs.
HMRC are historically more likely to issue a PLN where a director or officer has “form” in liquidating a debt laden company (including the debts owing to HMRC) and starting afresh behind the cover of a new limited company. This also applies where a company has gone into administration and is “reborn” without the burden of past obligations.
Potential exposure is not limited to “insolvent” situations. It exists for directors/officers of “live” companies where the company exhibits or has exhibited an erratic payment history of the obligations due to HMRC. If HMRC believes, that against a backdrop of poor and inconsistent payments, they run a substantial risk of non-payment, they can issue a PLN against a director or officer to pay that obligation personally.
Whilst fraud carries a higher burden of proof, neglect is a far more broad-ranging net which could lead to a recipient of a PLN struggling to defend themselves against the consequences of the notice.
For more information or advice on personal liability notices, please contact
Andrew Spooner.
