Q&As

Can the sole director of a limited company be responsible for the company’s unpaid tax debts? If the sole director dies intestate, will their personal representative(s) become liable for these debts?

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Published on LexisPSL on 28/07/2020

The following Tax Q&A provides comprehensive and up to date legal information covering:

  • Can the sole director of a limited company be responsible for the company’s unpaid tax debts? If the sole director dies intestate, will their personal representative(s) become liable for these debts?
  • A director’s liability for a company’s unpaid tax debts
  • Liability of personal representatives

Can the sole director of a limited company be responsible for the company’s unpaid tax debts? If the sole director dies intestate, will their personal representative(s) become liable for these debts?

A director’s liability for a company’s unpaid tax debts

As a general principle, a limited company is liable for its own debts and the company’s directors and shareholders are not directly liable for those debts. Nonetheless, there are a number of circumstances in which a director may become personally liable for the unpaid tax debts of the company.

If the company is in financial difficulties, its directors have a duty to act in the interests of creditors, including HMRC. Directors who act in breach of this duty may be subject to range of sanctions, including being required to make payments to the company. For more information, see Practice Note: Directors’ duties: companies in financial difficulties.

Finance Act 2020 includes provisions that make directors involved in tax avoidance, evasion or repeated corporate insolvencies jointly and severally liable for certain tax liabilities of insolvent (or potentially insolvent) companies. For more information, see News Analysis: Draft Finance Bill 2019-20—changes to protect tax in insolvency with HMRC to become preferential creditor.

Finance Act 2020 also includes provisions concerning the taxation of coronavirus support payments (CSPs), including imposing a tax charge where a person received CSPs to which they were not entitled. If

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