Tribunal says personal liability notice was valid

Published: 13th January 2023

Mr Wagstaff (W) was the sole director of Warehouse Holdings Ltd (WHL). WHL entered into a creditors’ voluntary liquidation in November 2015. HMRC later issued a personal liability notice (PLN) to W in respect of WHL’s NI liabilities totalling over £300,000 for periods dating back to 2009. W argued that the liabilities were subject to statutory barring, and so the periods prior to six years before the issue of the PLN in March 2019 should be dismissed. The First-tier Tribunal dismissed this, so W appealed to the Upper Tribunal (UT).

A director can be made personally liable for the NI contributions of a company where HMRC considers that the failure to pay is attributable to fraud or neglect of the officers of the company. The Limitation Act 1980 provides that there is a time limit on bringing action to recover sums to six years.

The UT dismissed W’s appeal. It said that it was “well established” that the unsecured liabilities of a company are determined within a liquidation, which commenced in November 2015. The limitation periods ceased to run at that date, so when the PLN was issued the amounts were due in full. W was therefore “liable to pay” within the meaning of the Social Security Administration Act 1992.

This case is a useful reminder that the protection offered by limited liability can be overruled in cases of fraud or (as in this case) negligence on behalf of officers of the company.