V5.188 Sanctions for tax abuse using company insolvencies
Joint and several liability of company directors to VAT debts in certain cases of insolvency
On 11 July 2019, HMRC announced1 a measure2 to combat 'the small minority of taxpayers who artificially and unfairly seek to reduce their tax bill to the misuse of insolvency of companies.' The measure is to take effect from 22 July 2020, and makes certain persons jointly and severally liable for amounts payable to HMRC where they are a director, shadow director or otherwise connected to a company which is, or is likely to be, subject to an 'insolvency procedure'. This is defined in FA 2020, Sch 13, para 8 as a company which3:
• is undergoing, or has undergone, a 'relevant winding up' (as defined)
• is in administration
• is in receivership
• a 'relevant scheme' (as defined) has effect in relation to it
• has been struck off the Companies Register
Further details of the measure are set out below.
The measure provides for an individual to be jointly and severally liable to HMRC, in certain circumstances involving insolvency or potential insolvency, for amounts payable to HMRC by a company. 'Company', in this regard, has the same meaning as in CTA 2010, s 1121, except that it also includes unlimited liability partnership4.
Such a liability arises when the individual is given a 'joint liability notice' by HMRC in any of the following three circumstances:
1. Tax avoidance and tax evasion cases5
An authorised HMRC officer may give a
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