Guidance

Overview of joint and several liability notices for the taxation of coronavirus (COVID-19) support payments

How HMRC deals with customers who receive a joint and several liability notice for a company that has received COVID-19 support payments, including conditions for giving a notice and safeguards.

From:
HM Revenue & Customs
Published
9 November 2021

This guidance is about the ‘taxation of COVID-19 support payments’ legislation at Schedule 16 of the Finance Act 2020. It tells you more about the legislation, including who it is intended to apply to and how.

The legislation helps deliver fairness across the tax system by:

  • recovering wrongly claimed COVID-19 support scheme payments
  • influencing those who see insolvency or dissolution as a way of avoiding tax due on COVID-19 support payments

It does this by allowing HMRC to give joint and several liability notices to directors, shadow directors and certain other individuals connected to a company. A joint and several liability notice will make the individuals jointly and severally liable for amounts the company owes to us.

What joint and several liability means

Where we believe a company (including limited liability partnerships) is insolvent or about to become insolvent, and the amount owed will not be paid, we may give a notice making an individual (or several notices making several individuals) jointly and severally liable for the relevant tax liabilities. This means that all individuals given a notice will be jointly and severally liable with the company for paying these liabilities.

We will pursue all individuals for the amount owed, taking debt recovery action if necessary, against whichever of them has sufficient assets to pay. It does not matter who pays or how much each individual pays as long as the amount is paid in full.

Conditions for giving a joint and several liability notice

An officer of HMRC may give a joint and several liability notice to an individual if they are satisfied that all 4 of the conditions A to D set out in the legislation have been met.

A summary of the conditions are:

  • the company is subject to an insolvency procedure, or there is a serious possibility of becoming subject to one (condition A)
  • 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 B)
  • 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 COVID-19 support payment (condition C)
  • there is a serious possibility that some or all of the income tax liability will not be paid (condition D)

Condition A

The company is subject to an insolvency procedure, or there is a serious possibility of it becoming subject to one.

A company is ‘subject to an insolvency procedure’ if any of the following apply:

  • it is in liquidation, administration, or receivership
  • it is subject to company voluntary arrangements or other arrangements
  • it has been wound up
  • it has been wound up or dissolved under the law of a country or territory outside the United Kingdom
  • its name has been struck off the register

A ‘serious possibility’ means we have good reason to believe that the company is likely to become subject to an insolvency procedure. This might happen, for example, if the company does not have enough assets to cover its liabilities even though formal insolvency proceedings have not started.

We will not give a joint and several liability notice unless there is clear evidence of the serious possibility of insolvency. The aim of the legislation is to deter individuals from misusing the insolvency rules to avoid paying their tax liability.

By giving joint and several liability notices where there is a serious possibility of an insolvency procedure, we will make directors, shadow directors or connected persons aware of the implications early in the process.

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.

This condition does not apply to a COVID-19 support payment made under a COVID-19 business support grant scheme or the COVID-19 statutory sick pay rebate scheme.

In the case of a support payment made under the Coronavirus Job Retention Scheme, this condition includes where the company is no longer entitled to keep the amount received.

Condition C

The individual was responsible for the management of the company at the time the income tax first became chargeable, and the individual knew then that the company was not entitled to the amount of the COVID-19 support payment in relation to which the tax is chargeable.

Condition D

There is a serious possibility some or all of the income liability will not be paid.

Where a company is subject to an insolvency procedure it will normally be clear whether that company will be able to pay the amounts it owes.

We will decide, based on the evidence available, whether to give a joint and several liability notice to the individuals. If at any point it becomes apparent there is a serious possibility that some or all of the tax liability will be unpaid, we may give a joint and several liability notice as long as the other conditions have been met.

For example, if we find that directors are stripping assets out of the company and the company is unlikely to have enough assets to pay what it owes, then we may issue joint and several liability notices.

Example Giving a joint and several liability notice for the taxation of COVID-19 support payments.

Mr C was director of CSS Ltd. In the accounting year ending 31 December 2020, CSS Ltd claimed a COVID-19 support payment under the Coronavirus Job Retention Scheme on 15 June 2020.

Mr C was involved in the day-to-day running of the company and were responsible for keeping accurate employee records.

Mr C completed the Coronavirus Job Retention Scheme online claim form stating that they had 50 employees and confirmed on the form that the information he was submitting was accurate.

We opened a compliance check on 15 February 2021 to establish if the company was entitled to payments under the Coronavirus Job Retention Scheme. It was established during the check that the company only had 20 employees and that Mr C knew this when making the claim.

A HMRC officer calculates that there is an income tax liability of £150,000. An assessment is made on the company and no appeal is made.

Several months later the amount is still outstanding despite a number of requests for payments from us, including visits from HMRC’s Debt Management team.

Mail addressed to the company is now being returned marked “ceased trading – return to sender”. Further investigation reveals that the company has become insolvent.

An officer of HMRC considers whether a joint and several liability notice is appropriate and looks at each of the conditions:

  • condition A – met, the company is subject to an insolvency procedure
  • condition B – met, the company is liable to an income tax charge as not entitled to Coronavirus Job Retention Scheme payments for the number of employees claimed
  • condition C – met, because:
    • Mr C was director of the company and directly involved in the operation of the company
    • Mr C knew the claim was inaccurate when submitting
  • condition D – met, evidence indicates there is a serious possible income liability will not be paid

All 4 conditions are met, so the officer gives a joint and several liability notice to Mr C making him jointly and severally liable for the outstanding amount of £150,000.

Mr C appeals his notice on the grounds he believes all the conditions to give them are not met.

The appeal is heard by the First-tier Tribunal, which upholds the notice. Mr C is jointly and severally liable for the whole amount owed. This means HMRC can choose to pursue payment from either Mr C or the company.

The joint and several liability notice

The joint and several liability notice must:

  • specify the company to which the notice relates
  • set out the reasons why the officer considers that each condition has been met
  • specify the amount of the relevant tax liability if the existence and amount of that liability have been established
  • explain what the giving of the notice means to the individual
  • offer a review by us and explain how this works
  • explain the individual’s right of appeal

Safeguards (including rights of review and appeal)

This legislation contains the following safeguards.

Withdrawal or modification of notice

We must withdraw a joint and several liability notice given to an individual, if either:

  • any of the relevant conditions were not met when the joint and several liability notice was given
  • it is no longer needed for the protection of revenue

We will also withdraw a notice in other cases where it is considered appropriate.

Where an individual has been given a joint and several liability notice, we may vary the amount specified in the notice if it seems the amount is, or has become, too much or not enough.

Right of review

If we give an individual a joint and several liability notice and the relevant tax liability has been established, we will offer the individual a review of the decision to give the notice.

The individual has 30 days to accept the offer of a review, unless we give an ‘extension notice’ specifying a later date. If the individual wants to accept our offer of a review, they must do so in writing.

It is possible to accept our offer for a review after the deadline for doing so, provided that we are satisfied that both of the following apply:

  • the individual had a reasonable excuse for not accepting the offer of a review within the permitted period
  • the request is made without unreasonable delay once the reasonable excuse had ended

If the individual accepts the offer of a review, we must carry out the review within 45 days, unless a different period is agreed. The review will be carried out by an officer not previously involved in the case.

The individual will be given the opportunity to make comments and we will take these into account during the review. The individual cannot accept our offer of a review and appeal to the tribunal at the same time.

The individual is not able to challenge, on an appeal against a joint and several liability notice, the existence or amount of any tax liability of a company to which the notice relates. However, an individual can have the right to participate in an appeal against the company’s liability.

Right of appeal

If an individual wants to appeal against a joint and several liability notice, they must do so to the First-tier Tribunal, within the later of the following dates:

  • 30 days from the date shown on the joint and several liability notice
  • if we have given an extension notice, by the date shown in the extension notice
  • if the individual has accepted the offer of a review, 30 days from the date of HMRC’s notice telling the individual of the outcome of the review

Permission from the First-tier Tribunal to appeal is needed when the both of the following apply:

  • an individual does not accept our offer of a review on time
  • we do not accept the individual had a reasonable excuse for requesting a review out of time

The First-tier Tribunal must confirm the notice unless one or more of the following applies:

  • it appears to the tribunal that any of the relevant conditions were not met
  • the notice is no longer required for the protection of revenue
  • an amount specified in the notice is incorrect

The tribunal may decide that the individual has no liability under the notice or vary the amount in the notice.

Appeal in respect of company liability

An individual may:

  • take full part in the appeal hearing, for example by making submissions to the court on behalf of the company
  • continue the appeal if the company is unable or unwilling to do so

The individual can do this if all of the following apply:

  • the individual is made jointly and severally liable for a tax liability of a company
  • the company is subject to an insolvency procedure
  • an appeal by the company in respect of that tax liability has been made but not yet settled

If a company does not appeal, an individual may appeal the company’s liability if both of the following apply:

  • the individual is made jointly and severally liable for a tax liability of the company
  • the company is subject to an insolvency procedure

The appeal must be made within 30 days of the date the joint and several liability notice is given, and may be made even if a time limit for the company to appeal has expired.

Get more information about appeals and reviews

You can find out more information about appeals and reviews in:

To find out more about appealing to the tribunal:

Published 9 November 2021
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