How HMRC deals with customers who are involved in tax avoidance, tax evasion or repeated insolvency who receive a joint and several liability notice, including how notices interact with penalties and safeguards.
HMRC has preferred status in terms of their debts in Insolvencies. The Finance Act of 2020 which received Royal Assent in July 2020, confirmed this was to be the case going forward.
As the Act has now passed into Statute, the headline was on the preferential treatment but on 7th October 2021, the full ramifications of the other provisions within the Act became apparent.
The key one to keep an eye out for is Schedule 13, which looks to deal with ‘serial offenders’ in terms of:
- Number of company Insolvencies,
- Non-payment cases, and
- The removal of the corporate ‘veil’ in such instances.
HMRC, undoubtedly the Official Receiver, and Liquidators are on the lookout for any Phoenix situations. Whilst HMRC state this relates only to a small minority of companies, who conduct themselves like this, it will potentially leave Directors exposed.
Schedule 13 The Finance Act of 2020 which received Royal Assent in July 2020, states that “HMRC will issue Joint and Several Liability Notices to individuals, who have been involved with companies which have become Insolvent and have a tax liability with HMRC” – that is all encompassing, potentially.
If HMRC believe Directors ‘are at their work’ they will issue a Joint and Several Liability Notice to the individual, and ‘tie in’ the new Phoenix Company.
The following can potentially be included in any Joint and Several Liability Notice:
- Unpaid tax liability in Newco,
- Any tax liability in Newco for 5 years, from the date of the Joint and Several Liability Notice, and
- Any old company liabilities.
The Notice will be aimed at any non-compliers here and not innocent ‘connected parties’ i.e. those with little influence in the day to day running of companies e.g. people who are shareholders only.
Coronavirus and the suspension of Court proceedings etc, have given the legislators time to think and catch up, in terms of the loopholes that exist.
These provisions of the Finance Act 2020, along with the treatment of fraudulent and, or misappropriate BBLs and CBILs Loans, and tidying up in the Statute surrounding Dissolved Companies, ensures there is going to be a lot more scrutiny in terms of failing businesses.
See HMRC guidance at: