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Joint and several liability – new taxation powers

Initial focus on coronavirus support payments - but moving on to avoidance, evasion, insolvency, etc

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Extract from HMRC notice published yesterday:

"Legislation introduced in the Finance Act 2020 aims to deliver fairness across the tax system by:

·     recovering coronavirus support scheme payments claimed incorrectly

·     influencing the behaviour of those who see insolvency as a way of avoiding their tax relating to coronavirus support payments

The purpose of joint and several liability is to make directors of companies jointly and severally liable for the company’s tax liability in certain circumstances.

This includes when an individual was responsible for the management of the company at the time the Income Tax first became chargeable, and the individual knew (at that time) that the company was not entitled to the amount, and there is a serious possibility of insolvency.

Where this happens, we may issue a joint liability notice to the individuals that benefited from the tax evasion or avoidance.

An authorised HMRC officer can give a joint liability notice if all the conditions A to D below have been met.

Condition A: The company is subject to an insolvency procedure, or there is a serious possibility of becoming subject to an insolvency procedure.

Condition B: The company is subject to an Income Tax charge as a result of receiving a coronavirus support payment it was not entitled to.

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 relating coronavirus support payment.

Condition D: There is a serious possibility that some or all of the Income Tax liability will not be paid.

 

The initial guidance on this, and the other aspects, can be found at:

https://www.gov.uk/government/publications/joint-and-several-liability-t...

https://www.gov.uk/government/publications/joint-and-several-liability-t...

https://www.gov.uk/government/publications/joint-and-several-liability-r...

https://www.gov.uk/government/publications/joint-and-several-liability-p...

 

It looks like HMRC finally have serious intentions of clawing back monies due (but previously unrecoverable) ... so anyone on here who has previouisly expressed disquiet about any client's willingness to play ball (i.e. repay undue grants or simply pay taxes due) by 'hiding' behind the corporate shield, now needs to get prepared for some honest discussions with such clients.

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Jason Croke
By Jason Croke
19th Nov 2021 08:59

Nice post and informative.

I posted an article last week about Personal Liability Notices (PLN's) which is where HMRC can assess a penalty on a Director if they fail their fiduciary duties which leads to a significant VAT loss.

It seems with these new powers, HMRC are likely to pursue taxpayers....of the 4 conditions, it looks like C is the interesting one, in terms of proving intention (at the time, how many businesses will have done a board minute or documented the basis of making the claim? Very few, at the time it seemed like a rush to apply for any handouts the government was offering, and that may now come back to bite.

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By Paul Crowley
19th Nov 2021 09:07

Does not have impact on the honest trader with a company that is still viable
Or at least we hope so
Given the quantum of claims, I would hope these powers are used in the way they are intended to be used

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Replying to Paul Crowley:
RLI
By lionofludesch
19th Nov 2021 10:19

Paul Crowley wrote:

Does not have impact on the honest trader with a company that is still viable
Or at least we hope so

HMRC have been known to act as a kangaroo court.

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By Justin Bryant
19th Nov 2021 09:35

This retrospective legislation was mentioned by me here a while back re BBL company fraud: https://www.accountingweb.co.uk/any-answers/dissolving-a-company-with-a-bbl

Enforcing it and recovering any stolen money is another matter altogether of course.

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