The answer to the question can I have joint and several liability for HMRC debt if my company goes into liquidation is yes you can.
The basic principle is that a company director does not have joint and several liability with the company for its HMRC tax debts. However, there are limits on the scope of which a limited liability company will enable a director to avoid liability for company tax debts personally.
If a company director is deemed to have abused their position and run up HMRC tax debts they can in certain instances be jointly and severally liable with the company to HMRC for them. However, it does require a reasonably high degree of potential misconduct or for circumstances to exist where HMRC debts are being run up by directors of insolvent companies. There are specific conditions that apply before HMRC can issue what is legally known as a Joint Liability Notice.
When Can A UK Company Director Have Joint And Several Liability For HMRC Debt?
A UK company director can have joint and several liability for HMRC debt in cases when there is repeated insolvency and non-payment of tax.
Multiple Companies Going Into Insolvency
In essence the way these rules arising from Section 100 of the Finance Act 2020 and paragraph 3 of Schedule 13 of the Finance Act 2020 work is when HMRC is a majority creditor in cases of repeat insolvent companies where there is poor tax compliance and or payment then it has the power to issue Joint Liability Notices.
If a director has two or more companies (“the old companies”) that go into an insolvency procedure such as liquidation, administration and company voluntary arrangement and during a period of five years prior to the Joint Liability Notice being issued, any of the following applied a director could be held jointly and severally liable for the tax of the next company (“the new company”):
- Each of the old companies had a tax liability.
- Each of the old companies failed to submit a relevant tax return.
- Each of the old companies had made an omission that meant HMRC could not deal with a submitted tax return
The trade of the relevant companies needs to be the same or similar and the tax liabilities of one of the old companies must be more than £10,000 and amount to more than 50% of its total unsecured debts.
Terms Of A Joint Liability Notice
Given a Joint Liability Notice is a somewhat draconian procedure there are several safeguards for the individual served with one.
A Joint Liability Notice must set out:
- The reasons it has been issued showing all of the conditions for it have been met.
- Confirm the meaning of the notice.
- Detail the liability arising under it.
- Offer an individual the right to review within 30 days of the notice.
- The right to a statutory appeal to the First-Tier Tribunal within 30 days of the notice or conclusion of a review by HMRC.
