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Company Unpaid NICs – Company Directors Liable

A company called L Wear Limited went into administration in March 2007 owing HMRC £321,307 in unpaid NICs.  Under Section 121C of the Social Security Administration Act 1992  HMRC are allowed to issue personal liability notices (PLNs) when a company has failed to pay NI contributions and that failure is “attributable to the fraud or neglect of one or more individuals who were, at the time of the fraud or neglect, officers of the company” .

The HMRC duly issued a PLN against the Finance Director, Mr O’Rorke.   He appealed the PLN claiming that he had been suffering from an addiction which affected his behaviour.  The Tribunal found that the state of mind of the individual forms an essential ingredient of assessing liability.

This  means that even if company directors do not consciously act negligently they could still be held personally liable for  unpaid NICs.    However, this is not the end of the case, so it will be interesting to see how things progress.

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