Understanding the impact of a Personal Liability Notice (PLN)

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Updated: 2nd February 2021

What is a Personal Liability Notice (PLN)?

A Personal Liability Notice, or PLN, is a notice issued to an individual by HMRC, transferring a company’s liability for unpaid National Insurance Contributions to the recipient. It’s a serious measure that’s been put to use more frequently since it was first introduced in 2009, when it was commonly used to deal with serial ‘phoenixism.’

Phoenixism describes a situation where the assets of a struggling company are sold to the existing directors, who move on to form a new company without the attached debt. It’s a process that typically causes severe losses to creditors, including HMRC, and one that’s used intentionally by directors to avoid paying the company’s debts.

Having added PLNs to their arsenal of weapons for fighting tax fraud, HMRC now also use them to deal with other issues including preference payments, and in compulsory liquidation cases where they believe NI contributions have been deliberately avoided.

When are Personal Liability Notices issued?

The deliberate non-payment of National Insurance Contributions by company directors has become a particular focus for HMRC investigators, and can result in Personal Liability Notices being issued.

The following scenarios are likely to attract interest from HMRC in this respect:

  • When company directors have repeatedly used ‘phoenixism’ to avoid paying their company’s tax and NI debts
  • A particular creditor or creditors have been paid prior to the company entering insolvency, in preference to other creditors including HMRC – known as ‘preference payments’
  • People or other companies connected to an insolvent company have received cash payments, or assets have been transferred to them
  • Directors have taken significant salaries even when the company was struggling

The main premise for issuing a PLN is the belief by HMRC that the director or other company officer has intentionally tried to prevent HMRC from receiving money due to them in the form of company National Insurance payments. They can also be held liable for any interest and penalties due on the unpaid amounts.

What is a Personal Liability Notice

What does a Personal Liability Notice mean for the recipient?

PLNs can be issued to company directors, shadow directors, and other officers of the company. HMRC will conduct an investigation and invite anyone they believe may have committed serious tax offences for interview prior to issuing a notice.

Directors and others have the opportunity to explain why their company’s National Insurance liabilities haven’t been paid, and if HMRC feel the reasons are genuine, a PLN won’t be issued.

Personal Liability Notices are commonly associated with huge sums, however, and for those who do receive one, it can mean personal bankruptcy, disqualification as a director, and even a prison sentence if the level of fraud is severe.

It is possible to challenge a PLN, but you need to act quickly if you receive one. Real Business Rescue is a major part of Begbies Traynor Group, and has extensive experience of helping directors and other company officers to launch a challenge. We offer free same-day consultations to quickly identify the seriousness of your situation, and provide advice for directors across the UK.

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