What is a Personal Liability Notice (PLN)?

I am indebted to Euan Temple of Temple Solicitors for the following (which I have edited slightly):

A PLN issued by HMRC seeks to make a director personally liable for the company's unpaid PAYE and National Insurance debts. However, HMRC may only issue a PLN if it appears to them that the failure of the company to pay its tax liabilities is "attributable to fraud or neglect on the part of one or more individuals who, at the time of the fraud or neglect, were officers" of the company.

Directors may appeal a PLN on the basis that:

1. the sum claimed in the PLN is not covered by a relevant provision (see below)
2. the failure to pay the tax liability was not attributable to any fraud or neglect on the part of the director in question
3. the director was not an officer of the company at the time of the alleged fraud or neglect, or
4. the opinion formed by HMRC when deciding to issue the PLN was unreasonable.

The power to issue PLNs has been available to HMRC since 1992 and has not been used very often but we understand that they are now being used more widely than before. Accordingly, directors who are accused of acting fraudulently or negligently by a liquidator, an administrator or creditors generally should be aware of their possible liability to HMRC, as well as any liability they may have to the company itself (or its liquidator or administrator) . . ."
My Comment

A Finance and Tax Tribunal decision in 2010, Re Leslie Livingstone click link, sets out the parameters fairly clearly; and it would appear that to make a PLN enforceable there has to be a reasonably clear intention on the part of the directors to withhold payments from HMRC while at the same time paying other creditors or the directors themselves.

In the Livingstone case, Mr Livingstone was a practising chartered accountant and sole director of the company. When the company ceased trading and sold its business the proceeds were used to repay the bank overdraft, which he had personally guaranteed and was supported by charges given by the shareholders; and to pay (amongst others) £16,000 to himself and a company he also operated. No payment was made to HMRC on account of the PAYE arrears of over £60,000 of which he was well aware. The Tribunal confirmed the PLN issued by HMRC.

Summary

It is potentially a very risky strategy to withhold payment from HMRC as a convenient way of easing cash flow problems. It is even more risky to take money out of your company while deliberately leaving overdue PAYE unpaid!

Advice I give here is free, without liability on my part. It is not a substitute for formal advice.

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