A limited company’s tax arrears are the company’s debt, and becoming insolvent does not transfer them to you. HMRC does hold specific powers to reach a director personally, and this page sets out what they are, what triggers them, and how narrow they are. It is general information, not advice about your position — if any of it looks close to home, that is a reason to speak to a practice, not to a website.
No, not by default. A limited company is a separate legal person, and the corporation tax, VAT and PAYE it owes are its debts rather than yours. If the company becomes insolvent owing HMRC money, that debt is dealt with in the insolvency alongside every other claim, and HMRC ranks as a creditor of the company. It does not automatically acquire a claim against you.
This holds even where the arrears are large, and even where the money was collected on HMRC’s behalf. What changes the position is not the size of the debt but personal fault, a signature, or a pattern of conduct across more than one company. Those exceptions are set out below, and they are narrower than most directors fear.
A Personal Liability Notice, or PLN, is a specific HMRC power to make an individual officer of a company personally liable for the company’s unpaid National Insurance contributions, where the failure to pay was attributable to that person’s fraud or neglect. It comes from section 121C of the Social Security Administration Act 1992.
Two things about it are routinely misunderstood. The first is its scope: a PLN reaches Class 1, Class 1A and Class 1B National Insurance contributions, together with interest and penalties on them. It does not reach income tax, VAT or corporation tax. The second is its trigger: HMRC has to establish personal fault by a named individual, and the burden of proof sits with HMRC, on the balance of probabilities.
“Officer” is wider than the board. It covers a director, manager, company secretary or similar officer, anyone purporting to act as one, and, where a body is managed by its members, those members.
Where the money was there and went somewhere else, or where the failure to pay was deliberate. HMRC’s guidance tests neglect objectively — what a reasonable and prudent person in that role would have done — but states that in practice it pursues fraud or serious neglect rather than every late payment.
The patterns its manuals describe are prolonged non-payment by a company that could have paid, continuing to pay directors or selected creditors while National Insurance went unremitted, and knowingly diverting money that should have gone to HMRC. Before issuing a notice, HMRC reviews the company’s books and records, identifies who held office and who controlled the payroll, examines what the company’s money was actually spent on, invites the officer to make representations, and apportions culpability where more than one person was involved.
The corollary matters as much as the rule. HMRC’s own guidance is explicit that officers of genuinely failed companies, and those who took reasonable steps to minimise the National Insurance debt, are not the target. A director whose company ran out of money in an ordinary way is not in PLN territory.
They are separate mechanisms with separate triggers, and a director worried about HMRC is often exposed through one of those instead. A personal guarantee is a contract you signed and is enforceable whatever happens to the company. Wrongful trading, under section 214 of the Insolvency Act 1986, is a general company-law liability rather than an HMRC power, and it turns on continuing to trade past the point where there was no reasonable prospect of avoiding insolvent liquidation. An overdrawn director’s loan account is a debt you owe the company, which a liquidator has a duty to collect. Those routes are set out in full on the personal liability page.
A PLN is narrower than all of them and sits outside the insolvency process altogether: it is HMRC, using its own statutory power, in respect of National Insurance only, on evidence of your fraud or neglect. No liquidator is involved and no court order is needed before HMRC can demand payment.
Three worth knowing about, none of which is triggered by ordinary arrears.
Deducted money that never reached HMRC, and decisions that look like preferring yourself. PAYE and National Insurance taken out of staff wages, and VAT charged to customers, were collected on HMRC’s behalf rather than earned. A company that kept trading on that money while paying directors, connected parties or chosen suppliers is the fact pattern these powers were written for, and it is the one HMRC looks for in the bank statements.
Also on the list: taking new credit after the point where recovery was no longer realistic, and starting a second company in the same trade after the first failed owing HMRC, which is precisely what the repeated-insolvency conditions test for. Poor records make every one of these worse, because a director who cannot show where the money went is arguing about their own conduct without evidence.
What does not, on its own, create personal liability: being unable to pay, owing a large amount, having ignored letters, or having taken a time-to-pay arrangement and broken it. Those make the company’s position worse and bring enforcement closer. They are not personal fault.
Yes. Section 121D of the same Act gives a right of appeal to the First-tier Tribunal, and the grounds are set out in the legislation: that some or all of the amount is not a contribution the power covers, that the failure to pay was not attributable to your fraud or neglect, that you were not an officer at the time of the alleged fraud or neglect, or that HMRC’s opinion on how much to attribute to you was unreasonable.
The burden of proof on any ground raised is on HMRC, which is unusual and worth knowing. The time limit is not generous: the normal 30-day window for appealing an HMRC decision applies, so a notice is not something to leave unopened. Appeals turn on evidence of what the company’s money was actually used for and what your role in those decisions was, which is another reason records matter.
Speak to an insolvency practice before HMRC escalates, rather than after. Nothing on this page tells you whether any of these powers apply to you, and no website can, because it turns on facts about your company’s payments and your part in them. What a practice can do is look at the actual position, tell you which exposure is real and which is anxiety, and set out the routes still open.
Timing does most of the work here. Once a winding-up petition is advertised the company’s bank account is usually frozen and the choice of route has effectively closed. What that first call involves is set out separately. You can find a practice in the directory and contact it directly; initial conversations are normally free, and having one commits you to nothing.
Can HMRC take my house if my company owes tax?
Not for the company’s tax debt on its own. Company tax arrears are the company’s liability and HMRC ranks as a creditor of the company. Your personal assets come into it only where a separate liability attaches to you personally — a personal guarantee you signed, an overdrawn director’s loan account, a court order for wrongful trading, or an HMRC notice such as a Personal Liability Notice, which requires HMRC to establish fraud or neglect on your part.
What is a Personal Liability Notice?
A notice under section 121C of the Social Security Administration Act 1992 that makes an officer of a company personally liable for the company’s unpaid National Insurance contributions, where the failure to pay was attributable to that person’s fraud or neglect. It covers Class 1, 1A and 1B contributions plus interest and penalties on them. It does not cover income tax, VAT or corporation tax.
Does HMRC routinely pursue directors personally for company tax debts?
No. Every power to reach a director personally requires something beyond unpaid tax: fraud or neglect for a Personal Liability Notice, avoidance, evasion or repeated insolvency for a joint and several liability notice, and a deliberate inaccuracy for a transferred penalty. HMRC’s own guidance says officers of genuinely failed companies, and those who took reasonable steps to reduce the debt, are not the target.
I deducted PAYE and National Insurance from wages but could not pay it over. Am I personally liable?
Not automatically. The unpaid amounts remain the company’s debt unless HMRC establishes personal fault. The National Insurance element can be reached by a Personal Liability Notice where the failure to pay was attributable to an officer’s fraud or neglect, and continuing to pay directors or selected creditors while National Insurance went unpaid is the pattern HMRC looks for. A company that simply ran out of money is a different case.
Can HMRC make me personally liable for unpaid VAT or corporation tax?
Not by Personal Liability Notice, which is limited to National Insurance contributions. VAT and corporation tax can reach a director by other routes: a joint and several liability notice under Schedule 13 to the Finance Act 2020 in avoidance, evasion or repeated insolvency cases, or a penalty for a deliberate inaccuracy transferred to the officer responsible for it. Each requires HMRC to establish more than non-payment.
Can I appeal a Personal Liability Notice?
Yes, to the First-tier Tribunal, on the grounds set out in section 121D of the Social Security Administration Act 1992: that the amount is not a contribution the power covers, that the failure was not attributable to your fraud or neglect, that you were not an officer at the time, or that HMRC’s apportionment was unreasonable. The burden of proof on those grounds is on HMRC, and the appeal window is normally 30 days.