The Quick Answer
No. As a director or shareholder, you will not be personally liable for the tax debts of a limited company. However, there are some very exceptional circumstances where you can be. They are rare – see more below.
The answer in more detail
One key point of being a limited company is that it gives the shareholders and directors limited liability. If the company fails and enters liquidation all the company creditors can claim are the assets within the company. They cannot touch the personal assets of directors and shareholders apart from in exceptional circumstances.
Tax debts such as VAT, PAYE and Corporation Tax are unsecured creditors, and they remain claims against the company when it goes into liquidation i.e. their recourse is against the remaining company assets only.
The exceptional circumstances:
- Generally, where HM Revenue and Customs can prove neglect or fraud by the directors. I have seen them attempt this use this just once in 20 years.
- Under rules contained in Schedule 13 of Finance Act 2020 HM Revenue and Customs can issue a Joint Liability Notice for tax debts accrued after 22 July 2020. They would do this if the directors have had three company liquidations with tax debts over £10,000 each in a five year period or if there has been deliberate tax avoidance or evasion.
- There is a catch all claim that can be brought by a liquidator for wrongful or fraudulent trading – this is to recover funds for all creditors. These cases are extremely rare and usually involve cases with creditors over £1m and clear intent to defraud creditors.
You can appeal against a claim from HM Revenue and Customs within 30 days of receiving the notice of a claim.
If you need advice on this area, please do get in touch with us.