Directors of phoenix companies could find themselves personally liable

Directors of phoenix companies

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HMRC are looking to come down hard on individuals/directors of businesses who have run up tax liabilities in a business and are looking to avoid paying the liability by placing the company into an insolvency procedure (i.e. an insolvent liquidation) whilst setting up the same/similar business (a phoenix that rises from the flames of the old business). Directors of phoenix companies could find themselves personally liable.

This new legislation introduced by HMRC is only looking to attach to the small minority of companies and directors that seek to gain an advantage in this way and HMRC recognises that the majority of companies become insolvent because they have genuine financial difficulties. 

Where an individual is a repeat offender, an authorised officer from HMRC may give a joint and several liability notice to an individual if they are satisfied that all 4 of the conditions set out in the new legislation have been met.

A summary of the conditions are:

  • in the past 5 years the individual had a relevant connection to at least 2 ‘old companies’ that were subject to an insolvency procedure and had a tax liability (Condition A).
  • a ‘new company’ is or has been carrying on a similar trade to any 2 of the old companies (Condition B).
  • the individual has a relevant connection to the ‘new company’ (Condition C).
  • the relevant old companies have a tax liability of more than £10,000 that is more than 50% of the total amount of those companies’ liabilities to their unsecured creditors(Condition D).

A joint and several liability notice must be given within 2 years of the day on which HMRC first became aware that the conditions for giving a notice have been met.

If you are a director/individual with a business facing financial difficulties then please do not hesitate in contacting My Insolvency for free advice from a qualified and independent adviser today.

From our experience, it often seems easier for a director not to make a decision for fear of getting it wrong. For just the cost of a telephone call, you can obtain free advice today to explore and understand how we at My Insolvency can, as professionally qualified advisers, help you as directors in taking the next step for you and your business.

As turnaround specialists, we aim to rescue companies that are on the verge of insolvency. Our involvement is tailored to you and your company and we provide an important service in saving many failing companies. Call us now to see how we can help you and your business in these difficult times.

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