A limited company has a legal obligation to pay tax on annual profits. As a director, you must register your company with HMRC for corporation tax and pay this liability within nine months and a day after the company’s accounting year ends.
Tax liability is the total amount of tax debt owed by the company from taxable events. These include taxable income, making sales, and property tax for example.
Can HMRC hold a director responsible for unpaid tax liabilities? The answer is yes – company directors can be made personally responsible for the non-payment of PAYE, National Insurance contributions, and VAT when there’s evidence that the failure to pay was deliberate. Find out more here…
Who is Liable?
The Finance Act of 2020 allows HMRC to issue Joint Liability Notices to company directors under certain conditions. This applies to those who repeatedly have insolvency issues with outstanding tax, particularly if a director has two or more insolvencies in the past five years.
Unpaid PAYE depends on the problems – if HMRC has issued a wrong code to an employee this will be rectified with an arrangement to make up payments by adjusting the tax code. However, if the director has made the error by deducting the PAYE from the employee but not paid it to HMRC there is a possibility that the director will be responsible on a personal basis.
Unpaid National Insurance contributions (NIC) can be recovered from individual directors with the issue of a Personal Liability Notice, if this action is due to fraud or neglect on the behalf of the director. The notice will specify the amount of NICs that the director is personally liable for alongside any penalties and interest that applies.
Unpaid VAT when deliberate actions are taken to avoid payment can also be made personally liable. If the company is expected to become insolvent, or is already in liquidation HMRC would be unable to recover unpaid tax from the company directors.
Unpaid Corporation tax when built up as debt will be attempted to be recovered by HMRC through enforcement action. In specific situations where payments have continued to be paid to company directors instead of corporation tax liabilities, HMRC can look to make directors personally liable for part or for the entire debt.
Need more information?
If you need VAT return help it’s easy to get from reputable tax accountants in London. Outsourced bookkeeping services will provide your company with tailored solutions and expert handling of all your accounting paperwork. You’ll be able to discuss the best VAT scheme for your business depending on your industry, and once your account is set up all information will be processed in accordance with tax laws.
You won’t need to be concerned about PAYE compliance either. You’ll be assured of meeting all PAYE returns and other relevant payroll obligations on time without ever missing an HMRC deadline. All tax and NIC liabilities and deductions will be taken care of for you, so that you can focus on running your operation smoothly and efficiently.
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