HMRC has the power under Schedule 13 Finance Act 2020 to issue Joint and Several Liability Notices (JSLNs) which transfer a company’s tax liabilities to individuals connected with the company where certain criteria is met. This may include tax, interest and penalties.
The aim of JSLNs is to stop individuals using company insolvency procedures as a way of avoiding paying a tax liability. They are perhaps most widely seen where directors use “phoenixing’ tactics – winding up one company and starting a new one under the same trade, often with the same assets and staff.
What is a Joint and Several Liability Notice?
A JSLN makes individuals, such as directors, shadow directors, or those with significant influence over a company, liable for the company’s tax liabilities. This means that HMRC can pursue any of the individuals named in the notice for the full amount owed.
HMRC may issue a JSLN where the company is subject to an insolvency procedure, or there is a serious possibility of the company becoming subject to an insolvency procedure, and the individual issued with a JSLN was responsible for one of the following two circumstances being present:
- Tax Avoidance or Evasion: Where it appears to HMRC that a company has engaged in tax avoidance arrangements or tax evasive conduct.
- Repeated Insolvency and Non-Payment: In cases where an individual has been connected to multiple companies that have become insolvent and failed to meet their tax liabilities.
In addition, JSLN can apply where a penalty has been issued to a company for facilitating tax avoidance or evasion which includes penalties relating to breaches of DOTAS, POTAS and enabling tax avoidance schemes.
JSLNs can be issued for liabilities relating to accounting periods 22 July 2020 onwards. However, JSLNs related to fraudulent COVID-19 support scheme claims can be issued regardless of the accounting period in which the payment was made.
JSLNs are increasingly being used by HMRC in suspected fraud cases, for example, investigations under Code of Practice 9 (COP) or the Contractual Disclosure Facility (CDF).
What should you expect from a JSLN?
Upon issuing a JSLN, HMRC is required to provide:
- Details of the company to which the notice relates.
- Reasons why HMRC believes the conditions for issuing the notice have been met.
- The amount of the relevant tax liability, if established.
- An explanation of the implications for the individual.
- An offer for a review of the decision.
- Information on the right to appeal the notice.
What are your rights?
If you receive a JSLN, you have the right to:
- Request a Review: You can request an internal review by HMRC within 30 days of receiving the notice.
- Appeal to the First-tier Tribunal: If dissatisfied with the outcome of the review, you can appeal to the First-tier Tribunal within 30 days of the review decision.
How common are JSLNs?
A response to a freedom of information request submitted by Menzies to HMRC shows that the following number of JSLNs have been issued since July 2020 –
| Tax Years | Number of JSLNs issued |
| 2022/23 | 16 |
| 2023/24 | 53 |
| 2024/25 | 34 |
We expect this figure to increase significantly in future years as pressure mounts on HMRC to close the tax gap.
How can Menzies assist you?
Navigating the complexities of JSLNs requires expert guidance. At Menzies, our Tax Disputes and Disclosures team offers:
- A thorough review of the JSLN to assess its validity.
- Strategic advice on the best course of action, whether it’s requesting a review or preparing for an appeal.
- Support throughout the review and appeal processes.
If you’ve received a Joint and Several Liability Notice or Personal Liability Notice, please contact our Tax Disputes and Disclosures team for confidential advice.
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