In David Howick v HMRC [2022] TC8531, a director who neglected to ensure that a company paid its PAYE and NICs when he took over as its sole director was found not to have acted as a reasonable and prudent man would in the circumstances. His failure meant that HMRC was able to assess him personally for the company's NICs  debts.

  • Mr Howick became a director of some seven different companies over a short period of time between 2015 -2016.
  • By 2018 all of the companies had failed and were either in administration or being wound up.
  • One of the companies, SP Surface Finishers Limited (SP) went into liquidation owing HMRC £63,337.40 in National Insurance Contributions (NICs).
  • HMRC issued Mr Howick, the sole director at the time, with a Personal Liability Notice. It was issued under Section 121C Social Security Administration Act 1992 (SSAA 1992) to recover NICs due.

Mr Howick appealed to the First Tier Tribunal (FTT).

The FTT considered whether the failure to pay HMRC was attributable to the Appellant’s neglect. Did he meet the standard to be expected of a reasonable and prudent man in those circumstances?

Mr Howick blamed his company's failures to pay the PAYE and NICs due were due to ‘the usual unpredictability of commercial life’.

The FTT found that:

  • Mr Howick had become sole director of SP, following the illness of its director. This was the time when payments to HMRC stopped.
  • He was aware from management reports that no PAYE or NICs was being paid each month.
  • The company had debt factoring facilities which could have been used to assist its cash flow if that was the issue.
  • Mr Howick blamed his past ill health and a car accident on his failure to pay HMRC. The FTT noted that these things had occurred well prior to him accepting his directorships.
  • He had a history of business failures. His previous printing company went bust in 2008.
  • Lack of funds is not a reason to allow an appeal against a Personal Liability Notice.

The failure to pay HMRC was attributable to Mr Howick’s neglect, the appeal was dismissed.

Useful guides on this topic

Personal Liability Notices
A Personal Liability Notice (PLN) may be issued by HMRC in the event of a company's or LLP's failure to pay its tax debts or tax penalties to HMRC. A PLN will transfer the liability to pay the debt to one of its officers.

VAT: penalties
The VAT penalties regime allows a penalty to be assessed on a company director via a Personal Liability Notice (‘PLN’).

External links

David Howick v HMRC [2022] TC8531


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