Directors Potential Liability for Un-paid PAYE and NIGC

It is estimated that nationally, there are arrears of taxes in excess of £40 Billion. In light of the current economic downturn and reduction in revenue to the Government there have been concerns for some time that the H M Revenue & Customs will utilise its powers for collecting sums that are due. Although they have worked with companies for the last couple of years and assisted where possible, they may begin to use their power more extensively.

Crown has the right to act against Directors personally

When a company fails to pay over PAYE and NI contributions the Crown have the right to consider an action against the Directors personally, under Section 121C of the Social Security Administration Act 1992.

Wrongful Trading – Section 214 of the Insolvency Act 1986

As a Partner with 32 years experience I have rarely seen this utilised. However, from my own experiences I have become aware of the H M Revenue & Customs’ more proactive actions as and when a company enters into a formal insolvency. Indeed I have recently, with the assistance of the H M Revenue & Customs, concluded a claim against a Director for wrongful trading as defined in Section 214 of the Insolvency Act 1986.
The company in question went into Creditors Voluntary Liquidation and in effect the only creditor of the company upon its ceasing to trade was the H M Revenue & Customs who were owed considerable monies in relation to unpaid PAYE and NI contributions as well as Value Added Tax.

Assistance from H M Revenue & Customs in bringing action

Following a comprehensive review of the company and discussions with the H M Revenue & Customs it was clear that there was a case to be answered and the H M Revenue & Customs were prepared to finance us and our solicitors in pursuing the Director.
When the information and supporting documentation was conveyed to the Director he acknowledged that there was a claim. Following a review of his personal assets an agreement was reached with the H M Revenue & Customs regarding repayment and it was not necessary in that matter for the case to proceed to Court, where additional costs would have been suffered by all parties.

Expect H M R & C to use their powers to collect Un-paid PAYE and NIGC

I must reiterate that this is a rare and unusual situation, however, it is clear that the H M Revenue & Customs will, in the future, consider utilising their powers if they believe that a Director has acted negligently and preferred other creditors to the H M Revenue & Customs.
The H M Revenue & Customs have and are most likely to continue to, work co-operatively through financial problems with companies and their Directors based upon constructive proposals with supporting documentation. However this is not to mean that they are a “soft touch”. They will I believe, and have already begun to consider their extensive powers to pursue those Directors who have, unwittingly or otherwise, utilised the Crown in the past as the “bank”.

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