When can a company debt be transferred to a Director?
When HMRC considers that the underlying behaviour associated with a company tax error is ‘deliberate’ (such that an incorrect return is knowingly submitted), and it believes it can demonstrate the company Director has personally gained from the error, a Company Officer Liability Notice may be issued to the Director. This notice means that the penalty amount charged to the company can be collected by HMRC from the company Director personally. HMRC may also issue this notice in instances where it considers the company is at risk of becoming insolvent, irrespective of whether the Director has personally benefited from the company tax error.
We are seeing more cases where HMRC Officers hold a pre-determined view that the underlying ‘behaviour’ that led to an error was deliberate, without having properly considered – or even asked for – the facts. In some cases, taxpayers, who are not represented by Tax Investigation specialists, are unable to adequately present the facts of the case to defend their position. This, combined with an increased push for revenues/yield by HMRC teams, has seemingly led to the unfair and disproportionate use of the Company Officer Liability Notice by HMRC.