Someone once told me, “I enjoy paying tax because, if I am paying tax then I must be earning money”.
In fairness, most people would agree with the above. Unfortunately, there has been a long-running battle for HM Revenue & Customs in catching up with those who see it differently.
The Government are planning to introduce policies within the Finance Act 2019-20 that proposes to make directors personally liable for company tax liabilities where the following five conditions are met:
- Where a company that is subject to an insolvency procedure or there is a serious risk that it will be;
- The company has engaged in tax avoidance or evasion;
- The person responsible for the company’s conduct enabled or facilitated it, or benefitted from it;
- There is likely to be a tax liability arising from the avoidance or evasion;
- There is a serious possibility some or all of that liability will not be paid.
The objective of these policies is aimed at those:
- Who try to exploit the insolvency procedure to avoid or evade taxes and/or payment of taxes and duties;
- Repeatedly accumulate tax debts without payment by running them through a succession of corporate vehicles which are made insolvent;
- Try to sidestep penalties for facilitating avoidance and evasion by going insolvent.
Based upon the five conditions, you can see the policies are aimed at those who act in a deliberate manner of tax avoidance/evasion. It is not aimed at those who have (say) missed the payment deadline for last month’s PAYE prior to entering into an insolvency procedure or, your overall circumstances demonstrate, as a director, you have acted honestly and fairly to creditors as a whole.
While many have criticised the proposed policies, HMRC have already been increasing investigation activity and a freedom of information request revealed in the 2018/19 accounts an additional £34.1 billion was generated from tackling tax avoidance, evasion or, simple non-compliance. The first 3 months of 2019, alone, has seen these investigations recover more than £20 million.
The key message that should be derived from the proposed policies is if you feel there is an increasing difficulty in managing the company tax affairs then seek early advice. HMRC are generally understanding where they learn of a possible issue at an early stage and it is better to engage with them early rather than wait until enforcement procedures commence.
Should you have an insolvency-related issue or a corporate dispute then please contact Gary Pettit at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may send an email to email@example.com or access our website at www.pbcbusinessrecovery.co.uk