What-is-a-Personal-Liability-Notice

What is a Personal Liability Notice (PLN)?

A Personal Liability Notice, or PLN, is a notification sent by HMRC to an individual, transferring a company’s responsibility for unpaid National Insurance Contributions to the recipient. It’s a significant action, more frequently applied since its introduction in 2009, primarily addressing serial ‘phoenixism.’

Phoenixism involves selling a struggling company’s assets to existing directors, who then establish a new company without the associated debt. This process often leads to substantial losses for creditors, including HMRC. Directors intentionally use this tactic to avoid settling the company’s debts.

With PLNs as part of their tools against tax fraud, HMRC now employs them for various issues, such as preference payments and cases of compulsory liquidation where deliberate avoidance of NI contributions is suspected.

 

When are Personal Liability Notices issued?

HMRC investigators are focusing on the intentional non-payment of National Insurance Contributions by company directors, leading to the issuance of Personal Liability Notices.

HMRC is likely to show interest in the following situations:

  • Directors repeatedly employ ‘phoenixism’ to evade their company’s tax and NI obligations.
  • Prioritising payment to specific creditors before a company becomes insolvent, known as ‘preference payments,’ sidelining others including HMRC.
  • Cash payments or asset transfers to individuals or companies associated with an insolvent company.
  • Directors draw substantial salaries during the company’s financial difficulties.

 

HMRC issues a PLN based on the belief that a director or another company officer deliberately attempted to hinder HMRC from receiving rightful company National Insurance payments. Additionally, they may be held accountable for any interest and penalties associated with the outstanding amounts. 

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What does a Personal Liability Notice mean for the recipient?

PLNs may be issued to company directors, shadow directors, and other officers of the company. HMRC will investigate and interview individuals suspected of serious tax offences before issuing a notice.

Directors and others can explain reasons for unpaid National Insurance liabilities during the investigation. If HMRC deems the reasons genuine, a PLN may not be issued.

Although Personal Liability Notices are often linked to substantial sums, receiving one can lead to personal bankruptcy, director disqualification, and even imprisonment for severe fraud.

Challenging a PLN is possible, but prompt action is essential upon receipt. Vanguard Insolvency, a significant part of Begbies Traynor Group, has extensive experience assisting directors and company officers in launching challenges. We offer free same-day consultations to swiftly assess your situation and provide guidance for directors throughout the UK. 

David Jackson MD
Senior Partner at Vanguard Insolvency Practitioners | Website

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.