Personal liability notices for Directors

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A personal liability notice allows HMRC to make a director personally liable for unpaid PAYE and National Insurance. HMRC uses this power where it believes that the company’s failure to pay these liabilities was due to the director’s fraud or neglect. Receiving a PLN is serious. It requires immediate attention and a clear understanding of your position and rights.

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At a glance

Personal liability notices are issued where HMRC believes a director’s actions led to unpaid PAYE or National Insurance. A PLN transfers the company’s liability to the director personally. We help directors understand the basis of the notice, challenge HMRC’s findings and negotiate outcomes that protect their personal and financial position.

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What is a personal liability notice?

A personal liability notice is a statutory notice issued by HMRC under the Social Security Administration Act 1998. It allows HMRC to recover unpaid PAYE and National Insurance contributions from a director personally if the non payment was due to the director’s fraud or neglect.

A PLN does not apply to all company tax liabilities. It applies specifically to PAYE and National Insurance. It is used where HMRC believes that the company’s default was caused by improper behaviour rather than financial difficulty alone.

Summary: A PLN transfers liability for PAYE and National Insurance from the company to a director where HMRC believes fraud or neglect has occurred.

When does HMRC issue a personal liability notice to a director?

HMRC issues PLNs where it considers that the company has failed to pay PAYE or National Insurance and that the failure was the result of deliberate conduct or a serious failure to take reasonable care. Common triggers include:

• repeated non payment of PAYE or NIC
• use of funds for other purposes instead of paying tax
• failure to make deductions at source
• ignoring HMRC correspondence
• continuing to trade while accruing unpaid PAYE liabilities

HMRC considers the overall conduct of the business and the director’s role in managing payroll and financial affairs.

Summary: A PLN is issued where HMRC believes the company’s non payment was caused by director conduct rather than financial hardship.

What does HMRC mean by fraud or neglect in a PLN?

Fraud or neglect refers to deliberate or careless conduct that leads to the non payment of PAYE or National Insurance. Fraud involves intentional wrongdoing. Neglect involves failing to take reasonable care, such as ignoring warnings, failing to keep proper records or failing to ensure payroll obligations are met.

HMRC assesses the facts carefully. It will consider how payroll was managed, whether the director understood their obligations and whether reasonable steps were taken to prevent the arrears arising.

Summary: Fraud or neglect refers to deliberate behaviour or a failure to take reasonable care that leads to unpaid PAYE or NIC.

Can HMRC make directors personally liable for unpaid PAYE or National Insurance?

Yes. A PLN allows HMRC to pursue the director personally for the unpaid amounts. This is an exception to the usual rule that a company’s liabilities remain with the company.

A PLN does not apply to other taxes such as corporation tax or VAT. It is used specifically for PAYE and National Insurance liabilities where HMRC believes the non payment was caused by the director’s conduct.

Summary: Directors can be personally liable for PAYE and National Insurance if HMRC issues a valid PLN.

How does HMRC decide which directors are responsible?

HMRC looks at the conduct of each director individually. Factors include:

• whether the director had control over financial decisions
• the level of involvement in payroll and tax compliance
• whether warnings were ignored
• whether the director acted responsibly when the business faced financial difficulty
• whether reasonable steps were taken to prevent or address non payment

HMRC may also consider the company’s governance, record keeping and internal controls when deciding who is responsible.

Summary: HMRC examines each director’s actions to decide who contributed to the non payment.

Can you challenge or appeal a personal liability notice?

A PLN can be challenged. You can request an internal review by HMRC or appeal to the First tier Tribunal. A challenge may be appropriate if the director did not control payroll decisions, if there was no fraud or neglect or if the company had reasonable grounds for the non payment.

An appeal must be supported by clear evidence. HMRC will expect a detailed explanation of the director’s role and conduct.

Summary: PLNs can be appealed, but any challenge must be supported by strong evidence.

What evidence do you need to dispute a PLN?

Evidence may include:

• internal management records
• payroll documentation
• correspondence with HMRC
• financial accounts and cash flow information
• board minutes or internal decision making documents
• communications with accountants or advisers

This evidence helps show whether the director acted responsibly and whether failures were caused by circumstances outside their control.

Summary: Detailed records and financial documents are essential to dispute a PLN.

What happens if a personal liability notice is upheld?

If a PLN is upheld, the director becomes personally liable for the unpaid PAYE and National Insurance. HMRC may pursue recovery through standard enforcement methods. This can include payment demands, enforcement agents or court proceedings.

A PLN can also affect a director’s credit position and may have implications for future business activity.

Summary: If upheld, the director is personally liable and HMRC may pursue recovery action.

Can you negotiate or settle a PLN with HMRC?

It may be possible to negotiate payment terms or seek a reduction where the evidence supports it. HMRC will consider the director’s financial circumstances and the strength of the case. A time to pay arrangement may be available if the director can demonstrate that immediate payment is not possible.

Negotiation is more effective when supported by clear evidence and professional advice.

Summary: Settlement and time to pay solutions may be available depending on the facts.

How does FWJ help directors facing a personal liability notice?

We assist directors from the moment a PLN is received. We review the notice, assess the evidence and advise on the best route forward. This may include challenging HMRC’s findings, preparing detailed submissions or negotiating a payment arrangement. Our goal is to provide clear, practical advice that protects your personal position and supports a fair outcome.

Summary: FWJ provides experienced guidance to help directors challenge or resolve PLNs and manage personal exposure.

Our expert tax defence team

Our firm has a huge experience in dealing with and defending Personal Liability Notice credit claims.

• Andy Lynch. Andy is an expert on a wide range of HMRC claims and before joining FWJ, he spent 18 years at HM Customs & Excise in their National Investigation Service. His experience is unrivalled in all types of HMRC claims including HMRC investigation defence, VAT claims, R&D tax credit defence, Account Freezing Orders, Tax Disclosure, Code of Practice 8 & 9 claims, winding up petition defence and much more.
• Stephen Downie. Stephen is a Partner and a former ACCA accountant who combines financial expertise with deep legal knowledge to deliver clear, commercial advice. He acts for directors, shareholders, insolvency practitioners and private clients in corporate governance disputes, director disqualification defence, and HMRC-related claims including tax avoidance schemes, PLNs, VAT and PAYE security demands. His focus is always on achieving the best outcome for clients as efficiently and cost-effectively as possible.
• Anita Sharma. Anita is a Senior Associate specialising in tax litigation and financial disputes with HMRC. She advises high-net-worth individuals and major commercial clients on appeals against HMRC decisions, complex tax assessments, and enforcement proceedings. Anita has secured interim relief following HMRC revocations to keep clients trading during appeals and is known for achieving practical, results-focused outcomes in high-value disputes.
• Connor Coombs. Connor is a Paralegal in the tax team assisting on a broad range of HMRC investigation and defence matters. He supports clients with Code of Practice 8 and 9 investigations, time-to-pay arrangements, HMRC statutory demands and R&D tax credit disputes. Connor also helps prepare detailed evidence and submissions for use in appeals and settlement negotiations, ensuring cases are presented clearly and effectively.

“FWJ did precisely what it set out to do. I am extremely grateful for its assistance.”

A client who had received a Request for Security from HMRC for a sum that would have caused their company severe financial difficulties. We helped them to have the entire bill withdrawn

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At Francis Wilks & Jones we have considerable experience of assisting directors and business owners faced with a personal liability notice and associated claims, such as bankruptcy petitions by HMRC or attempts to obtain a directors disqualification order. Don’t settle for second best. Contact our expert team of tax disputes solicitors today and we can help.