Tribunal says personal liability notice was valid
The Upper Tribunal recently considered a case where the director of a limited company was issued a notice to make good the company's unpaid NI liabilities following a liquidation. He tried to argue that some of the £300,000 was time barred under statute. What happened?
Mr Wagstaff (W) was the sole director of Warehouse Holdings Ltd (WHL). WHL entered into a creditors’ voluntary liquidation in November 2015. HMRC later issued a personal liability notice (PLN) to W in respect of WHL’s NI liabilities totalling over £300,000 for periods dating back to 2009. W argued that the liabilities were subject to statutory barring, and so the periods prior to six years before the issue of the PLN in March 2019 should be dismissed. The First-tier Tribunal dismissed this, so W appealed to the Upper Tribunal (UT).
A director can be made personally liable for the NI contributions of a company where HMRC considers that the failure to pay is attributable to fraud or neglect of the officers of the company. The Limitation Act 1980 provides that there is a time limit on bringing action to recover sums to six years.
The UT dismissed W’s appeal. It said that it was “well established” that the unsecured liabilities of a company are determined within a liquidation, which commenced in November 2015. The limitation periods ceased to run at that date, so when the PLN was issued the amounts were due in full. W was therefore “liable to pay” within the meaning of the Social Security Administration Act 1992.
This case is a useful reminder that the protection offered by limited liability can be overruled in cases of fraud or (as in this case) negligence on behalf of officers of the company.
Related Topics
-
New interactive tool for transition period profit reporting published
If you are a sole trader, or a partner, reporting your profits could be more complicated this year due to the basis period reform. How can a new online tool help?
-
The IHT exemption that HMRC hides
You have the task of obtaining probate for your mother’s estate which involves completing tricky inheritance (IHT) tax forms. One of these requires you to report lifetime gifts. How might the form’s wording cause you to miss out on an IHT exemption?
-
Gifts of shares to children: direct or via a trust?
You want to give away some shares in your company to help provide an income for your children. Is it better to make a direct gift to them or should you transfer the shares to a trust with your children as beneficiaries?