Personal Liability Notices

What is a personal liability notice?

The personal liability notice was introduced by Section 64 of the Social Security Act 1998 and came in to effect from 6th April 2009. The personal liability notice system was introduced to tackle perceived abuse of the National Insurance system and to act as a deterrent to future abuse and losses to the National Insurance Fund.

A notice can be issued, where in the opinion of HMRC, there is sufficient evidence to show ‘on the balance of probabilities’ that the company failure to pay the National Insurance contributions due was attributable to the neglect of fraud of an individual who was an ‘officer’ of the company at the time of the failure. HMRC describes the officers as ‘culpable officers’ in the personal liability notice.

The right of recovery by personal liability notice includes all Contributions payable by the company for both the directors and the employees and includes:

  • Employers and employee National Insurance contributions
  • Class 1A & Class 1B National Insurance contributions
  • Interest in respect of National Insurance contributions
  • Penalties in respect of National Insurance contributions

Any individual issued with a personal liability notice becomes personally liable for the company National Insurance Contributions debt specified in the notice.

A specialist team at HMRC carries out investigations and has responsibility for the issue of Personal Liability Notices.
The team issuing personal liability notices is based in London but covers the whole of the UK; they are very specialised and particularly competent in the area of personal liability notices.

A Personal Liability Notice can only be issued when a company has failed to pay National Insurance Contributions and that failure is, in the opinion of HMRC,attributable to the fraud or neglect on the part of an individual who was an officer of the company when the National Insurance Contributions should have been paid.

HMRC will generally only commence personal liability notice enquiries where they have a strong belief that they can recover a significant proportion of the unpaid National Insurance Contributions from one or all of the officers.

An Inspector from HMRC will:

  • Examine the company books and records
  • Invite representations from the officers of the company to find out the reasons for the failure to pay, with a view to finding a reason to issue a personal liability notice
  • Determine the facts and circumstances surrounding the company failure to pay the National Insurance Contributions with a view to establishing the grounds to issue a personal liability notice
  • Consider the extent of the negligence or fraud of each officer in the Company for the personal liability notice
  • In cases where there is more than one officer seek to ‘fairly’ and ‘reasonably’ apportion the debt between the officers based on the available evidence and in relation to the level of negligence or fraud
  • Consider and respond to representations and/or any information the officers of the company believe to be relevant to the underpayment of National Insurance and take this in to consideration for the personal liability notice

Generally the officers who are subject to the personal liability notice are:

  • Directors
  • Company Secretary
  • A manager of the business as a whole
  • Shadow directors

The above is not an exhaustive list.

Yes, HMRC will give full consideration to any representations made by or on behalf of the officers of a company when dealing with or considering a personal liability notice. These representations can be made either individually or as a group, we can advise you on the best course of action with regard to the personal liability notice depending on your particular circumstances.

In most cases HMRC will take in to account the representations as part of the personal liability notice process and agree to a meeting where, if the directors accept some or all responsibility and the representations are made at the right time, a settlement can be negotiated on a voluntary basis without the issue of a Personal Liability Notice.

Alternatively, where the one or all of the officers do not accept liability or dispute the personal liability notice, representations can be made and negotiations undertaken on the basis of negotiating a NIL settlement.

If the company is in liquidation there is no statutory obligation or requirement for you to cooperate with a Personal Liability Notice enquiry.

However, you should think carefully before declining to cooperate with HMRC on the issue of a personal liability notice as you will lose your opportunity to present your point of view and negotiate with HMRC.

HMRC will ask the Liquidator or Official Receiver for access to the books and records of the business to help them make their decision whether or not to issue a personal liability notice.

HMRC will consider if a Personal Liability Notice should be issued and to whom. The notices will then be sent to each ‘culpable’ officer setting out how HMRC arrived at the decision to issue a personal liability notice and how much they expect each officer to pay.

Once the personal liability notice has been issued it is subject to an appeal process before the Tax Tribunal.

It is preferable to negotiate with HMRC before the Personal Liability Notice is issued and either negotiate a reasonable apportionment or make representations on the basis that the officers were not negligent of fraudulent and therefore should not be subject to a personal liability notice.

Gilbert Tax understands that people sometimes make mistakes in their dealings with HMRC and that HMRC make mistakes in dealing with taxpayers. Many people do not know how to deal with HMRC or who to turn to for help resolve the tax dispute.

Gilbert Tax is a firm of tax advisors who specialise in resolving people's problems with HMRC. We have extensive expertise in dealing with all forms of tax investigations and tax disputes as well as with taking matters to the Tax Tribunal where agreement cannot be reached.

Gilbert Tax deal both directly with the individual who is under enquiry and also work with many firms of accountants supporting them in dealing with HMRC disputes and advising them on how to handle HRMC to get the best result.

The fact is that proper management of HMRC is the best way of reducing the tax, interest and penalty as well as the time taken in resolving any tax dispute.

Gilbert Tax are none judgemental and rigorously defend your position within the scope and parameter of the law. We take control and manage the process to minimise the interruptions that any form of tax investigation causes to an individual's life and business.