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HMRC internal manual

National Insurance Manual

Class 1: Personal Liability Notices: When a PLN will be considered?

Section 121C, Social Security Administration Act 1992

The above legislation provides that a Personal Liability Notice may be issued when there has been an underpayment of contributions and HMRC consider that failure is attributable to the fraud or neglect of an individual officer of the company.

Under the legislation any failure to pay on time could constitute neglect as a taxpayer who knows of an obligation - in this case the statutory obligation to pay National Insurance Contributions by a prescribed date - and fails to satisfy that obligation could be regarded as being to some degree negligent.

However, in practice, and in order to protect officers of genuinely failed companies and those regarded to have taken all reasonable steps to minimise the company National Insurance Contributions debt, a Personal Liability Notice will only be issued where HMRC believes that the failure to pay the contributions due was attributable to fraud or more serious levels of neglect.

Generally HMRC may consider a case to involve more serious neglect where it can be established that against a background of persistent failure to pay the contributions due the company was making significant and/or regular payments:

To other creditors


To connected persons or companies


In the form of directors salaries

A case may also be judged to involve more serious neglect where ‘culpable officers’ have been associated with previous companies that have demonstrated a failure to comply with their statutory Income Tax PAYE/NIC obligations.

The legislation will often be applied to phoenix companies. The term ‘phoenix’ is described at NIM12204.

The legislation does not restrict the issue of a PLN to liquidated companies. For example a PLN may be issued in respect of a current company where it is considered that the officer’s previous record poses a significant risk to the payment of outstanding contributions.

NIM12206 provides further information of what HMRC consider before deciding if it is appropriate to issue a Personal Liability Notice.