HMRC Joint and Several Liability Notices: A Guide for Directors

A Joint and Several Liability Notice allows HMRC to make an individual personally responsible alongside a company for specified tax liabilities.

HMRC’s powers can apply in cases involving:

• tax avoidance;
• tax evasion;
• facilitating avoidance or evasion; and
• repeated insolvency and non-payment.

For directors of struggling limited companies, the repeated insolvency provisions are often the most relevant.

For the wider rules on director exposure, see our guide to when directors can become personally liable for HMRC tax debt.

The new company does not have to be identical to the old one.

HMRC can consider factors such as whether the new business has:

• the same or similar services;
• the same employees;
• the same premises;
• the same assets; or
• substantially similar trading activities.

This is why JSLNs are sometimes discussed in connection with phoenix companies.

However, starting another company after an insolvency is not automatically prohibited, and it does not automatically trigger personal liability.

The statutory conditions still have to be met.

The rules can potentially apply to individuals including:

• directors;
• shadow directors;
• participators; and
• certain people involved in the management of the new company.

This means HMRC can look beyond the person formally named as a director where somebody else is effectively involved in managing or controlling the business.

In qualifying repeated-insolvency cases, a JSLN can potentially cover:

• unpaid tax liabilities of the relevant previous companies;
• tax already unpaid by the new company when the notice is issued; and
• certain new liabilities arising for the new company while the notice remains in force.

HMRC guidance provides for liability relating to future taxes for up to five years in qualifying cases.

That can make a JSLN considerably more serious than simply being pursued for one historic company debt.

Yes.

An individual receiving a JSLN can normally request an HMRC review and can also have rights of appeal to the First-tier Tribunal.

Relevant time limits are typically 30 days, so directors who receive a notice should act quickly.

Possible issues might include whether:

• the statutory conditions were actually satisfied;
• the amount stated is correct;
• HMRC has identified the correct individual; or
• the notice remains necessary to protect tax revenue.

Because challenging a JSLN can involve detailed tax and legal issues, specialist professional advice may be required.

If you have been involved with previous insolvent companies that owed significant amounts to HMRC, do not assume that personal liability is inevitable.

Start by establishing:

1. how many relevant insolvent companies are involved;
2. whether the current business is genuinely the same or similar;
3. the level of HMRC debt within the previous companies;
4. whether the statutory thresholds are met; and
5. whether HMRC has actually issued or indicated that it may issue a notice.

If your current company is also struggling with HMRC arrears, early advice may help prevent the position worsening.

Our HMRC Tax Debt guide explains the wider options available to companies that cannot meet their tax liabilities.