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HMRC internal manual

Employment Status Manual

HM Revenue & Customs
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Agency and temporary workers: agency legislation - provisions from 6 April 2014: directors’ liability for paying PAYE debt (6 April 2014 onwards)

Applicable from 6 April 2014

Chapter 3A, Certain Debts of Companies under Chapter 7 of Part 2 of ITEPA 2003

Section 97Z(A) to (F) of the Taxes Management Act 1970.

Issuing a “Personal Liability Notice” to Company Directors

The provisions of either section 44(4) to (6) of ITEPA 2003 - persons providing fraudulent documents (see ESM2044), or section 46A of ITEPA 2003 - anti avoidance (see ESM2041) may dictate that another party, other than the employment agency, is to be treated as the employer of the workers for both tax and NICs purposes.

If that party is a company (which includes limited liability partnerships) and it fails or defaults from paying to HMRC the relevant PAYE debt by the required due date, then HMRC may hold the directors of the company personally responsible for paying that PAYE debt, plus any specified interest.

In such instances, HMRC may serve a ‘personal liability notice’ on any person who was a director of the company on the relevant date (see Note). The notice will specify the amount of PAYE debt owing and any interest accrued, and will require the person to pay those amounts over to HMRC within 30 days of the date the notice is served.

HMRC can serve a “Personal Liability Notice” to more than one director of the company in respect of the same PAYE debt, for which all directors are both jointly and individually liable to pay.

Note: The relevant date is either:

(i) where section 44(4) to (6) ITEPA 2003 applies (fraudulent documents provided), the date from which the fraudulent documents were provided, as mentioned at sub section 44(4) ITEPA 2003.

(ii) where section 46A ITEPA 2003 applies, (anti avoidance) the date that the anti avoidance arrangements were entered into.

Sections 97Z(E) and (F) TMA 1970 contain the relevant legislation under which HMRC will recover the sums due under a “Personal Liability Notice” and where appropriate, repay any surplus amounts collected plus interest accrued.

Appealing a Personal Liability Notice

There are appeal rights for persons served with a Personal Liability Notice in accordance with sections 44(4) to (6) ITEPA 2003, or section 46A ITEPA 2003. Further details are contained at (ESM2047).

Withdrawal of a Personal Liability Notice

A Personal Liability Notice may be withdrawn if it is quashed by a tribunal or an officer of HMRC considers it appropriate to withdraw the notice. In the event that an officer of HMRC withdraws the notice, then HMRC must give notice to the person upon whom the notice was served.