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HMRC internal manual

National Insurance Manual

NICs Personal Liability Notices: apportionment of the unpaid contributions between ‘culpable officers’

Section 121C of the Social Security Administration Act 1992

Section 121C of the Social Security Administration Act 1992 allows HMRC to apportion the unpaid contributions between one or more culpable officers according to their degree of culpability in respect of the failure by the body corporate to pay the contributions due.

Section 121C states that where, in the opinion of HMRC, there is no other culpable officer the sum specified in the Personal Liability Notice will be for the whole amount of unpaid contributions.

Where there is more than one culpable officer, the sum specified in each Personal Liability Notice will represent a proportion of the overall contributions that, in the opinion of HMRC, that officer’s culpability for the failure to pay bears in relation to all the culpable officers together.

Section 121C further provides that in assessing an individual officer’s culpability HMRC can have regard both to the gravity of that individual’s fraud or neglect and to the consequences of it.

During the Parliamentary Debates on the introduction of section 121C the government said:

“The government propose to apportion the debt between the directors who have been culpable in accordance with their degree of culpability. We recognise that all directors may not be equally culpable. It may be that a decision not to pay National Insurance contributions in full was taken at a board meeting. Equally, however, the decision might have been taken only by one or two of the directors acting on their own and steps taken to hide the non-payment from the other directors … The total debt, which includes any associated penalty and interest, will be apportioned between the culpable directors in proportion to their degree of culpability without taking account of each individual’s ability to pay. Thus no “innocent” director will be pursued simply because he has not disposed of his assets.”