Schedule 13 of the Finance Act 2020 has introduced new provisions empowering HMRC to issue a Joint Liability Notice on individuals for amounts payable by a company (including an LLP) to HMRC.
Schedule 13 of the Finance Act 2020 has introduced new provisions empowering HMRC to issue a Joint Liability Notice on individuals for amounts payable by a company (including an LLP) to HMRC in connection with either: (i) tax avoidance or evasion cases; (ii) repeated insolvency and non-payment cases; or (iii) cases involving penalties for facilitating avoidance or evasion.
This update focuses on the potential for liability in the event of repeated insolvency and non-payment cases.
Four conditions must be present before a JLN can be issued against an individual:
There are at least 2 companies (the “old companies”):
(a) with whom the individual had a ‘relevant connection’ at any time during the period of 5 years ending with the JLN (the “5-year period”);
(b) which became subject to an insolvency procedure during the 5-year period; and
(c) at the time of the insolvency procedure:
(i) the company had a tax liability; or
(ii) the company had failed to submit a relevant return or other document, or to make a relevant declaration or application, that it was required to submit or make; or
(iii) the company had submitted a relevant return or other document, or had made a relevant declaration or application, but an act or omission on the part of the company had prevented HMRC from dealing with it.
where “relevant” in (ii) and (iii) above means relevant to the question whether the company had a tax liability or as to the amount of its tax liability.
A relevant insolvency procedure includes liquidations (other than successful MVLs), administration, receivership, a CVA or Scheme of Arrangement and even where companies have been struck off the register under sections 1000 (by the Registrar) or 1003 (voluntarily by the company) of the Companies Act 2006.
A new company (the “new company”) is or has been carrying on a trade or activity that is the same as, or is similar to, the trade or activity previously carried on by each of the old companies.
The individual has had a ‘relevant connection’ with the new company at any time during the 5-year period.
At the time of the JLN at least one of the old companies had a tax liability and the total amount of the tax liabilities of the old companies is: (i) more than £10,000; and (ii) is more than 50% of the total amount of those companies’ liabilities to their unsecured creditors.
Insofar as the old companies are concerned this will include a director or shadow director and a ‘participator’ in the company.
A ‘participator’ in turn takes its meaning from section 454 of the Corporation Tax Act 2010. In relation to a company it means, a person having a share or interest in the capital or income of the company and includes:
The same individual must also have a ‘relevant connection’ with the new company. The same definition above applies to identify that ‘relevant connection’ but it also includes an individual who is concerned, whether directly or indirectly, or takes part, in the management of the company.
You are a director of a holding company and of various subsidiaries that all carry out the same or similar activities. The group is rendered insolvent by virtue of a deferred VAT liability which it cannot pay, and insolvency practitioners are appointed over each entity in the group. You are part of a bid to acquire the business and assets of one of the trading companies from its Administrators and you take on the role of director of the new company. Four years later, things are going well but a notice arrives from HMRC seeking payment of the old companies’ tax liability.
There are a multitude of scenarios that could lead to this same outcome; the most basic being a series of insolvencies where the business is reinvented at least three times in the same 5-year period.
An individual may be served with a JLN at any time within the period of 2 years beginning with the day on which HMRC first becomes aware of facts sufficient for them to conclude that the four conditions above have been met. The effect of a JLN renders an individual jointly and severally liable with the new company (and with any other individual who is also given a JLN) for:
Joint and several liability means that responsibility for a debt is shared by two or more parties and that any one party can be pursued for the entirety of that debt (with it then having a claim for a contribution from the others).
The Government and HMRC have a clear goal to prevent the most brazen phoenixism; where a company is repeatedly put into an insolvency process to deliberately shed liabilities and allow management to start again without any real regard to creditors.
The current provisions may deter some such cases, but it may also inadvertently catch other, potentially innocent, situations. Take the example above where a business is rescued after a group of companies all suffer an insolvency event at the same time. That cannot have been the intention behind the legislation, but it is nevertheless a risk that should be considered when considering insolvency options and the implications of buying an insolvent business.
Directors and members of LLPs, especially those that may be facing financial difficulties, would do well to consider their options now for managing this potential risk. That might include:
In this session, we examined the legal framework around grant funded collaborations and discussed the key risks to be aware of, including IP ownership and compliance with grant terms.
Bishopsgate Corporate Finance and law firm Browne Jacobson have jointly advised on the acquisition of award-winning tech solutions business, Custard Technical Services by US managers services and cyber security provider, Thrive.
The war on plastic is being taken to a new level, and businesses that don’t consider sourcing recycled packaging materials could face costly implications.
Law firm Browne Jacobson has appointed former Vice President and Chief Planning Officer (CPO) of Aston Martin Lagonda, Nikki Rimmington as its first Non-Executive Director (NED) of its Manufacturing & Industrials sector strategy board.
Browne Jacobson’s corporate technology dealmakers have advised Agilico, a workplace technology business, on its acquisition of Capital Document Solutions Limited for an undisclosed amount.
Browne Jacobson’s lawyers have advised Suez SA and its shareholders on its acquisition of its former UK waste management business – Suez R&R UK - from French headquartered business Veolia for an enterprise value of £2 billion.
Browne Jacobson’s national private equity (PE) lawyers have advised leading mid-market PE investment firm, Palatine Private Equity (Palatine) on its exit from CTS Group, the fast-growing specialist in testing, inspection and geoengineering consulting services to the construction and infrastructure sectors.
Browne Jacobson’s corporate finance lawyers have advised leading mid-market private equity firm, LDC and management on the sale of specialist managed IT services provider, Littlefish to Bowmark Capital.
Browne Jacobson’s private equity (PE) dealmakers have advised Palatine Private Equity backed CTS Group (Construction Testing Solutions Limited) on its acquisition of In Situ Site Investigation, a market leader in Cone Penetration Testing and Pressuremeter techniques and ground investigation services.
There are clearly challenging macro-economic factors at play but at Browne Jacobson we continue to see good levels of transactional activity with certain sectors being particularly buoyant: healthcare, financial services, energy & infrastructure and tech.
Browne Jacobson’s Manchester based corporate lawyers have advised tech enabled shipping and logistics service provider, World Options on its majority buyout by Italian headquartered MBE Worldwide (“MBE”) for an undisclosed sum.
Browne Jacobson’s corporate tech lawyers have advised specialist bicycle insurer Laka on an investment from Porsche Ventures (a venture capital division of Porsche AG), bringing its series A investment round to a total of $13.5m.
Browne Jacobson’s corporate dealmakers have advised leading property consultancy, Fisher German, on its merger with property consultants Matthews & Goodman in a move that will see the joint businesses now approach a turnover of almost £60m.
Browne Jacobson have successfully advised leading mid-market private equity firm LDC on its investment into global programmatic advertising company, Blis. The transaction will support Blis’ international growth strategy.
Browne Jacobson’s corporate finance team is celebrating after winning the prestigious “Corporate Law Firm of the Year’ award at this year’s East Midlands Dealmakers Awards.
Browne Jacobson’s corporate dealmakers have advised Coniston Capital on its management buyout (MBO) of bespoke kitchen design manufacturers Harvey Jones for an undisclosed sum.
Browne Jacobson’s banking & finance lawyers have advised HSBC UK Bank plc on the financed management buy-out of Derby-based bicycle supplier and distributor, Moore Large for an undisclosed sum.
The government has recently published the Corporate Transparency White Paper – it follows previous consultations on improving the quality and value of financial information on the UK companies register, powers of the registrar and implementation of the ban on corporate directors, which were published in 2020.
Browne Jacobson have successfully advised Triangle Fire Systems, its shareholders and management team on a £9m investment by the Business Growth Fund (BGF).
Browne Jacobson has strengthened its independent health & social care team with the addition of corporate finance lawyer Vicky Tomlinson.
Browne Jacobson’s national private equity (PE) lawyers have advised leading mid-market PE firm, Palatine Private Equity on its buyout of Jessup.
Browne Jacobson’s national private equity team is celebrating after one of its deals with Foresight Group LLP (Foresight) won the Private Equity/Venture Capital Deal of the Year at last night’s Insider Northern Ireland Dealmakers Awards 2022.
Browne Jacobson’s award-winning corporate finance team has cemented its status as one of the country’s leading corporate finance teams after being named in the UK’s top 20 legal adviser rankings and the top Midlands top 10 legal advisers.
Browne Jacobson’s Manchester based banking and private equity lawyers have advised OakNorth Bank on its loan facility to Apprentify Limited, a leading provider of digital marketing and tech apprenticeships for the North.
In the last nine months of 2021 we saw a huge amount of activity across all sub-sectors of health and social care.
Browne Jacobson’s corporate dealmakers have advised one of the UK’s leading fertility and IVF clinics, CARE Fertility (CARE) on its acquisition of Genesis Health Care LLP (trading as Leeds Fertility) for a confidential consideration.
Browne Jacobson’s private equity dealmakers have advised Palatine Private Equity backed Construction Testing Solutions Limited (CTS) on its acquisition of Glasgow headquartered geoenvironmental testing consultancy business, Mason Evans Partnership Limited (Mason Evans).
Browne Jacobson’s private equity dealmakers have advised the management sellers of CARE Fertility (CARE) on the sale of the entire issued share capital of CARE for an undisclosed amount.
Browne Jacobson’s national corporate tech lawyers have advised specialist insurtech business Laka on its $12m series A investment round. The cash injection will allow Laka to expand its operations across Europe and support its new retail partners based in Belgium, France and Germany.