Legislation introduced in Finance Act 2020 aims to deliver fairness across the tax system by deterring the use of tax avoidance and tax evasion; and influencing the behaviour of those who see insolvency as a way of avoiding their tax or penalty liabilities relating to tax avoidance or tax evasion; and repeatedly fail to meet their tax liabilities through insolvency.
The purpose of joint and several liability is to make directors of companies jointly and severally liable for the company’s tax liability in certain circumstances.
This includes where repeated insolvency proceedings are used to avoid the payment of relevant company liabilities.
Where this happens, HMRC may issue a joint liability notice to the individuals that benefited from the tax evasion and avoidance.
A joint liability notice tells the individual that they are jointly and severally liable with a company, and with anyone else that’s been given a joint liability notice, for the relevant tax liability.
Where a joint liability notice for tax avoidance and evasion is issued, the relevant tax liability is the amount of additional tax, penalties and interest due as a result of the company:
- entering into tax avoidance arrangements; or
- engaging in tax evasive conduct.
Each person receiving a notice is jointly responsible for paying the entire amount due. The amount will be reduced if certain penalties have been paid.
If the company that has been involved with the tax avoidance or evasion no longer exists, when someone is jointly and severally liable with the company, this means the individual is:
- solely liable for the relevant tax liability where no other individual has been given a joint liability notice for that liability; or
- jointly and severally liable with anyone else that has been given a joint liability notice for the relevant tax liability.
It is possible to request a review of any decision within 30 days of receipt of notification of a penalty charge.
An HMRC officer not previously involved in the matter will carry out the review. If the taxpayer disagrees with the outcome of the review, they can still appeal to the tax tribunal.
