Company directors personally liable for penalty

HMRC has the power to allocate up to 100% of a VAT penalty issued to a limited company to the directors or managers if the liability relates to deliberate errors on a tax return. This could be either a ‘deliberate not concealed’ error or one that is ‘deliberate and concealed’.

In this case HMRC issued each director a personal liability notice (PLN) for £89 306 relating to a penalty for £178 611 levied on CC Ltd which traded as a scrap metal dealer. HMRC had disallowed the company’s input tax claim because it believed this was connected to missing trader VAT fraud and imposed the penalty for inaccurate returns. The company ceased to trade on 24 December 2014 and went into liquidation.

The taxpayers appealed against the PLNs.

The First-tier Tribunal concluded that the taxpayers knew that the transactions were fraudulent. The directors had been alerted to...