Guidance

Joint and several liability — tax avoidance and evasion — JAS/FS1

Published 17 November 2021

You should read this factsheet if you may be jointly and severally liable for the relevant tax liability of a company that has been involved in tax avoidance or evasion.

We’ll tell you if you’re jointly and severally liable by giving you a joint liability notice. There is more information about joint liability notices in the section ‘What is a joint liability notice’.

Where this factsheet refers to a ‘company’, it also means a ‘limited liability partnership’.

Where this factsheet refers to ‘directors’, it means one of the following, a:

• director — as set out in section 250 of the Companies Act 2006
• shadow director — as set out in section 251 of the Companies Act 2006
• participator — as set out in section 454 of the Corporation Tax Act 2010

This factsheet at a glance

This factsheet tells you:

• what to do if you need extra support
• about joint and several liability
• what a joint liability notice is
• we may give you a joint liability notice if certain conditions are met
• that if we give you a joint liability notice, you’ll be jointly and severally liable for the relevant tax liability
• how we might reduce the amount you are jointly and severally liable for
• where to find more information about joint liability notices

If you need extra support

If your health or personal circumstances make it difficult for you to deal with us and you need extra support, please tell us what help you need. We’ll work with you to put in place any reasonable or supportive adjustments. You should contact the officer who wrote to you.

You can also ask us to deal with someone else on your behalf. For example, a professional adviser, friend or relative.

However, we may still need to talk or write to you directly about some things. If we need to write to you, we’ll send a copy to the person you’ve asked us to deal with. If we need to talk to you, they can be with you when we do.

Get help from HMRC if you need extra support.

About joint and several liability

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

• deterring the use of tax avoidance and tax evasion
• influencing the behaviour of those who:
  • see insolvency as a way of avoiding their tax or penalty liabilities relating to tax avoidance or tax evasion
  • repeatedly fail to meet their tax liabilities through insolvency

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.

It includes where repeated insolvency proceedings are used to avoid the payment of relevant company liabilities. Where this happens, we may issue a joint liability notice to the individuals that benefited from the tax evasion and avoidance.

What a joint liability notice is

A joint liability notice tells you that you’re jointly and severally liable with a company, and with anyone else who has been given a joint liability notice, for the relevant tax liability.

Where we give you a joint liability notice for tax avoidance and evasion, the relevant tax liability is the amount of additional tax, penalties and interest due as a result of the company:

• entering into tax avoidance arrangements
• engaging in tax evasive conduct.

Each person receiving a notice is jointly responsible for paying the entire amount due. The amount you are jointly responsible for will be reduced if you’ve paid certain penalties. There is more information about this in the section ‘When the relevant tax liability is reduced’.

Conditions for giving a joint liability notice

An authorised HM Revenue and Customs (HMRC) officer can give a joint liability notice to an individual if all the conditions (A to E) below have been met. These conditions only apply to the relevant tax liability of a company that has been involved in tax avoidance or evasion.

Condition A

The company has entered into tax-avoidance arrangements or has engaged in tax-evasive conduct.

Condition B

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

Condition C

At a time when the individual was a director, shadow director or a participator in the company, (one of the following applies):

• the individual (either):
  • was responsible, alone or with others, for the company entering into the tax-avoidance arrangements or engaging in the tax-evasive conduct
  • received a benefit which, to the individual’s knowledge, arose (wholly or partly) from those arrangements or that conduct
• the individual took part in, assisted with or facilitated the tax avoidance arrangements or tax-evasive conduct

Condition D

There is, or is likely to be, a tax liability relating to the tax-avoidance arrangements or to the tax-evasive conduct.

Condition E

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

When the relevant tax liability is reduced

We’ll reduce the amount you’re jointly and severally liable for by any penalties you’ve paid for the same amount under:

• section 61 of VAT Act 1994 — VAT evasion: liability of directors etc
• section 28 of Finance Act 2003 — Liability of directors etc where body corporate is liable to penalty for evasion
• paragraph 19 of Schedule 24 to Finance Act 2007 — Liability of company officer where company is liable to penalty under that Schedule
• paragraph 22 of Schedule 41 to Finance Act 2008 — Liability of company officer where company is liable to penalty under that Schedule

What if the company no longer exists

If the company that has been involved with the tax avoidance or evasion no longer exists, where we refer to you being jointly and severally liable with the company, this means you being:

• solely liable for the relevant tax liability where no other individual has been given a joint liability notice for that liability
• jointly and severally liable with anyone else that has been given a joint liability notice for the relevant tax liability.

Where this factsheet refers to a company’s liability or liabilities, in the case of a company that no longer exists, this means, its liability or liabilities immediately before it ceased to exist.

More information about joint liability notices

Read more information about joint liability notices for tax avoidance and tax evasion.

Your appeal and review rights

If we give you a joint liability notice, the notice will include an offer to review our decision. If you disagree with our decision, you can accept our offer to review it or you can appeal to the tax tribunal. However, you cannot challenge the existence or amount of any tax liability of the company to which this joint liability notice relates.

If you want a review

You can accept our offer of a review by writing to tell us why you think our decision is wrong. You must do this by the (later of):

• 30 days from the date of the notice
• the date shown on any extension notice we’ve given you

An HMRC officer not previously involved in the original decision will carry out the review. If you disagree with the outcome of the review, you can still appeal to the tribunal.

We’ll take into account anything you tell us when you ask for a review. You’ll have a chance to give more information about your case during the review.

You cannot accept our offer of a review and appeal to the tribunal at the same time.

If you want to appeal to the tribunal

If you want to appeal to the tax tribunal you must do this by the (later of):

• 30 days from the date of the notice
• the date shown on any extension notice we’ve given you
• 30 days from the date of any notice telling you the outcome of a review you’ve asked for

If you appeal to the tribunal, you’ll need to send them a copy of the notice with it. If you don’t, they may refuse to consider your appeal.

Appeal in respect of company liability

If you want to appeal or take part in an appeal on behalf of the company:

• you must have been made jointly and severally liable for a tax liability of the company
• the company must be subject to an insolvency procedure
• an appeal by the company for that tax liability must either not have been made, or made but not resolved

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

More information about appeals and reviews

Read more about your appeal rights if you disagree with a tax decision.

Read more about appealing to the tax tribunal.

You can also phone the tax tribunal helpline on 0300 303 5857.