Under powers set out in Finance Act 2020, directors of insolvent companies could find themselves liable for accumulated tax debts for up to five years.
Insolvency and restructuring experts are warning that joint and several liability notices extend HMRC’s powers to recover unpaid tax debts when businesses go bust.
While company directors are generally protected by limited liability, recovery powers granted to HMRC in the Finance Act 2020 mean directors can face greater personal liability for tax debts held by the company in the event of insolvency.
This has potential ramifications for companies if they plan to use an insolvency procedure to deal with the tax arrears of their company, particularly if they already have a number of insolvencies behind them.
One of the reasons for the new rules is to tackle phoenixism where a company goes into administration but is then resurrected by the old directors with the same business model.