A Personal Liability Notice (PLN) may be issued by HMRC in the event of a company's or a Limited Liability Partnership's (LLP's) failure to pay its tax debts or tax penalties to HMRC. A PLN will transfer all or part of the liability to pay the debt to one of its officers.
This is a freeview 'At a glance' guide to Personal Liability Notices (PLNs).
- A PLN is generally only used in cases where HMRC can prove that the underlying payment failure is attributable to the fraud or serious neglect of an officer.
- A PLN will typically be issued when a company goes into liquidation with tax debts.
There are three main types of PLN:
PLNs for National Insurance Contributions debt:
- A PLN may only be served if HMRC can prove that the non-payment of tax is attributable to the fraud or neglect of one or more of the company’s officers.
PLNs for VAT penalties:
- A PLN may apply if a company is liable to a VAT penalty for deliberate wrongdoing.
- The VAT wrongdoing is attributable to the deliberate action of an officer or officers of the company.
- In addition, the PLN can only be issued if one of the following circumstances exists:
- The officer gained, or attempted to gain, personally from the wrongdoing.
- The company is, or is likely to become, insolvent.
The conditions for imposing a VAT PLN are far stricter than those for imposing a NICs PLN.
PLNs for deliberate inaccuracies in company returns or a deliberate failure to notify in respect of corporation tax:
- Up to 100% of the penalty can be transferred to the company officer.
Who is an officer?
- Company officers include directors (including shadow directors), managers, and secretaries.
- LLP officers are members.
Officers can mitigate the risk of being served a PLN by ensuring that they are properly advised in the event of potential corporate failure and take prompt and reasonable action to obtain advice and mitigate the situation in the event that the company starts to have tax payment issues.
Appeals
NICs
An officer can appeal an NICs PLN on the basis that:
- The PLN should not have been raised on the amounts in question.
- The failure to pay was not due to fraud or negligence on the part of the officer in question.
- The individual was not an officer of the company at the time of the alleged fraud or neglect.
- HMRC's opinion in raising the PLN was unreasonable.
This must be made in writing to HMRC. This also affords the individual to request a postponement of the liability due under the PLN until the appeal is settled.
VAT
- An officer may appeal against the issue of the VAT PLN.
- PLNs are subject to the same procedures as company penalties.
- An officer of a company or LLP may appeal either the decision to raise a PLN against them or the amount of the PLN.
- An appeal against a PLN is not an appeal against the underlying company penalty, nor does the outcome of the appeal affect the status of the company penalty. Only the company can appeal the company penalty.
Corporate tax penalties
- A liable officer can appeal against the decision to pursue them for all or part of the penalty assessed on the company and the amount of penalty allocated to them.
- They cannot specifically appeal against the decision that they have gained or attempted to gain personally from the deliberate failure to notify, or that the company is likely to go into liquidation.
- As for VAT penalties, an appeal against a PLN for failure to notify or inaccuracy is not an appeal against the underlying company penalty, nor does the outcome of the appeal affect the status of the company penalty. Only the company can appeal the company penalty.
- However, where the company or administrator has decided not to appeal a company penalty, the company officer can ask the reviewing HMRC officer or tribunal to take account of the circumstances of the inaccuracy provided these have a direct bearing on the penalty allocated to the company officer.
Legislation
NICs: Section 121C of the Social Security Administration Act 1992 (SSAA 1992)
VAT & failure to notify: Para 22 Schedule 41 FA 2008
Inaccuracies: Para 19 Schedule 24 FA 2007