Personal liability for company’s VAT bill

Businesses challenged by HMRC often find themselves unable to continue and look to close down or sell. On 20 October 2021 a First-tier Tribunal decision highlighted that certain VAT-related debts can become liabilities for individuals in a personal capacity.

The company was Salford Santos Kebab Ltd. HMRC had decided in 2019 that the company a takeaway business had declared unrealistically high zero-rated supplies (averaging 84% of sales) and assessed the company for £56 140 considering 99% of sales to be standard rated. The company entered voluntary liquidation.

With a limited liability company the expectation is that all liabilities are contained within the company and the individuals involved are not responsible for the company’s debts. When such a company closes down it is broadly thought that the company’s debts after an appropriate procedure cease with it. The case of T Osman (TC8303) serves...