The Government introduced legislation in Schedule 13 of the Finance Act 2020 which allowed HMRC, in certain circumstances, to make directors of companies jointly and severally liable for a company’s VAT, PAYE, corporation tax and certain penalties.

HMRC are able to issue the notice if;

• At least two companies entered into insolvency in the last five years
• The new company is or has been carrying on a similar trade
• An individual has a connection with both the old and new companies
• The total tax liabilities exceeds £10,000 and HMRC represent more than 50% of the total creditor claims.

If the above criteria is met, HMRC are able to issue a red card via a joint and several liability notice to the director making him / her liable for any of the old / new companies’ debts. HMRC claim that this penalty is intended to tackle delinquent behaviour. Please do bear this in mind if you have any clients looking to close or restructure companies within a group. Your client could easily score an own goal and be caught by this legislation.