Directors becoming personally liable for unpaid NICs

The tax tribunal recently ruled on the legitimacy of a personal liability notice (PLN) to the directors of a company that had failed to pay national insurance contributions (NICs).

Mr. Livingstone was a director of a removals and storage company that went into liquidation on 20 July 2007. He was the sole director of that company for the final three years of its existence and solely responsibly for the day to day running of the business for that period. The company failed to pay over PAYE and NIC due to HMRC for 2005/06 and 2006/07 although it did make deductions from the employee’s wages.

The company ceased trading in January 2007 and sold its assets. The majority of the funds were used to pay off the bank overdraft, but what really annoyed HMRC was that the company made no attempt to pay down its tax and NIC liabilities.

HMRC issued a PLN on 6 April 2009, for the full amount of unpaid NIC of £60,428, to Mr Livingstone alone, as there were no other culpable directors. The PLN covered all the class 1 NICs unpaid by the company, not just the contributions due in respect of Mr. Livingstone’s employment as a director. HMRC could have added the interest and penalties due, but it appears on this occasion the amount listed on the PLN was purely NICs.

The only grounds for Mr Livingstone’s appeal were that the failure to pay the NICs was not attributable to any fraud or neglect on his part. HMRC argued that there was neglect but accepted that fraud was not an issue. The Tribunal agreed with HMRC and refused Mr Livingstone’s appeal against the PLN.

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The Tax Man

The Tax Man

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