A Personal Liability Notice (PLN) is a tool used by HM Revenue and Customs (HMRC) to hold directors or ‘culpable officers’ personally accountable for unpaid tax. It is typically used for either unpaid National Insurance contributions[1]Trusted Source – GOV.UK – NICs Personal Liability Notices or VAT, and as a measure to counter ‘phoenixism‘.
If you’ve received a PLN, it’s because HMRC believes you’ve acted negligently or failed to ensure your company meets its tax responsibilities. Common reasons include fraud, non-payment of taxes, non-filing of returns, or continuing to accrue new debts when insolvent[2]Trusted Source – GOV.UK – Company and company officer penalties.
Even if your previous company has been liquidated, it’s still possible to receive a PLN.
When HMRC issues a PLN, you have just 30 days to take action. Your options are:
Reach an agreement with HMRC
Make full payment of the debts
Submit an appeal
Two Main Types of PLN
You should be aware of two primary types of Personal Liability Notices (PLNs) that HMRC may issue:
PLNs for National Insurance Contributions (NICs) debt
HMRC can hold you personally liable if they can demonstrate that:
NICs were deducted from employees’ wages
These deductions were not paid to HMRC
The non-payment was due to fraud or neglect by one or more company officers
PLNs for VAT penalties
You may face a PLN for VAT-related issues if:
Your company is liable for a VAT penalty due to deliberate wrongdoing
The wrongdoing is attributable to the deliberate actions of an officer or officers
It’s important to note that for VAT-related PLNs, HMRC must also prove either that you personally gained, or attempted to gain, from the misconduct, or that your company is insolvent or likely to become insolvent.
What are the Consequences of Receiving a PLN?
Receiving a Personal Liability Notice (PLN) carries significant consequences that you need to be aware of. Once HMRC issues a PLN, you become personally responsible for the specified amount. This is not a trivial matter.
What does this mean for you?
Firstly, HMRC can pursue enforcement actions against you as an individual debtor. This might include:
Garnishing your wages
Seizing your personal assets
Initiating bankruptcy proceedings if the debt remains unpaid
Beyond the immediate financial impact, a PLN can have long-lasting effects on your professional life. It may hinder your ability to serve as a director or take on executive roles in other companies.
Challenging a PLN
If you’ve received a PLN, you may have grounds to challenge it. This involves a formal process where you dispute the basis on which HMRC issued the notice.
To mount a successful challenge, you’ll need to prove one of two things:
There was no negligence or fraud involved in the tax issue
You were not responsible for the financial management that led to these failures
As a liable officer, you can appeal against:
HMRC’s decision to pursue you for all or part of the company’s penalty
The amount of the penalty allocated to you
However, you cannot appeal against:
HMRC’s decision that you personally gained from the deliberate failure to notify
Their assessment that the company is likely to enter liquidation
Overall, challenging a PLN is not a decision to be taken lightly. You’ll need to weigh the costs and risks against the potential benefits and certainly take professional legal advice.
Expert Advice and Next Steps
At Company Debt, our licensed insolvency practitioners offer expert guidance on business rescue and HMRC negotiations. With over a century of combined experience, we’re here to help you explore your options and find the best path forward.
Let’s work together to protect your business and secure your future.
FAQs
What Does HMRC Joint and Several Liability Mean?
HMRC’s joint and several liability means that multiple people (like directors or managers) can be held personally responsible for a company’s unpaid taxes if the company is insolvent or close to it. This liability is enforced through a Personal Liability Notice (PLN) or a Notice of Requirement (NOR) and can apply in situations like VAT group registrations, limited liability partnerships, personal guarantees, and certain fraud cases (e.g., MTIC fraud). Anyone named is fully liable, and they must sort out individual contributions among themselves.
References
The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.
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