HMRC has published new guidance on joint and several liability notices which it can issue to individuals connected with a company which has received a covid-19 support payment to which it was not entitled and which is subject to (or likely to become subject to) an insolvency procedure.
A joint and several liability notice makes the individuals jointly and severally liable for tax charged under FA 2020 Sch 16 para 8, i.e. the charge that arises if a person has received a coronavirus support payment to which they were not entitled.
HMRC may give a joint and several liability notice to an individual if all four of conditions A to D set out in the legislation (Sch 16 para 15) have been met:
Condition A: the company is subject to an insolvency procedure, or there is a serious possibility of it becoming subject to one;
Condition B: the company is liable to an income tax charge as a result of receiving a covid-19 support payment it was not entitled to receive;
Condition C: the individual was responsible for the management of the company at the time the tax first became chargeable, and the individual knew (at that time) that the company was not entitled to the covid-19 support payment; and
Condition D: there is a serious possibility that some or all of the income tax liability will not be paid.
The guidance also sets out HMRC’s approach to some of these conditions, including:
HMRC will not give a notice unless there is ‘clear evidence’ of a serious possibility of the company becoming subject to an insolvency procedure (Condition A). HMRC’s intention is to deter individuals from misusing the insolvency rules to avoid paying tax.
HMRC will decide, based on the evidence available, whether to give a notice on the basis that Condition D is met, e.g. if the directors are stripping assets from the company.
The guidance also includes a worked example and details of review and appeal rights.
HMRC has published new guidance on joint and several liability notices which it can issue to individuals connected with a company which has received a covid-19 support payment to which it was not entitled and which is subject to (or likely to become subject to) an insolvency procedure.
A joint and several liability notice makes the individuals jointly and severally liable for tax charged under FA 2020 Sch 16 para 8, i.e. the charge that arises if a person has received a coronavirus support payment to which they were not entitled.
HMRC may give a joint and several liability notice to an individual if all four of conditions A to D set out in the legislation (Sch 16 para 15) have been met:
Condition A: the company is subject to an insolvency procedure, or there is a serious possibility of it becoming subject to one;
Condition B: the company is liable to an income tax charge as a result of receiving a covid-19 support payment it was not entitled to receive;
Condition C: the individual was responsible for the management of the company at the time the tax first became chargeable, and the individual knew (at that time) that the company was not entitled to the covid-19 support payment; and
Condition D: there is a serious possibility that some or all of the income tax liability will not be paid.
The guidance also sets out HMRC’s approach to some of these conditions, including:
HMRC will not give a notice unless there is ‘clear evidence’ of a serious possibility of the company becoming subject to an insolvency procedure (Condition A). HMRC’s intention is to deter individuals from misusing the insolvency rules to avoid paying tax.
HMRC will decide, based on the evidence available, whether to give a notice on the basis that Condition D is met, e.g. if the directors are stripping assets from the company.
The guidance also includes a worked example and details of review and appeal rights.
