We have seen an increased number of HMRC tax investigation cases where the directors have put a company into liquidation as the company is unable to pay its debts to HMRC and is insolvent but HMRC use various powers within the legislation to transfer the liabilities onto the directors in a personal capacity. Some examples of these are mentioned below:
1- Under Para 19 (1) Schedule 24 of the Finance Act 2007, penalties charged on a company can be transferred in full onto a director where there is deliberate or fraudulent behaviour causing an underpayment of tax.
2- Section 64 of the Social Security Administration Act 1998 gives HM Revenue & Customs the power to issue a Personal Liability Notice (PLN) to hold those behind the company personally liable in certain situations. If a director, manager or secretary of a business fails to pay National Insurance Contributions (NIC) and HM Revenue & Customs (HMRC) consider that non-payment was due to fraud or neglect, then they have the power to issue the individual with a Personal Liability
Previously HMRC had rarely used the above powers but in the last few months, we have seen two new cases where the liabilities have been transferred onto the directors personally and HMRC have gone to the extent of filing for bankruptcy of the director.