With continued uncertainty and volatility in the global economy, it is perhaps no surprise that many UK businesses have been struggling. The latest statistics from The Insolvency Service show that company insolvencies in the first five months of 2025 were higher than the same period last year and at a similar level to 2023, which represented a 30-year high in the annual number of insolvencies.

Companies are separate legal entities, independent of their shareholders, directors and officers. As a result, individuals running a business through a company can be protected from being held personally liable for a company’s debts.

This principle of limited liability can act as a barrier between a company’s debt and a shareholder’s or director’s personal assets, but it is not an impermeable one. In some instances, HMRC can utilise powers available to them to look through the company and seek to recover tax debts from a company’s director or officer personally, known as a personal liability notice (PLN).

A PLN can be used by HMRC to pursue individuals for a variety of different outstanding tax liabilities originally due from a company. Two of the more common tax liabilities that PLNs are used for are Class 1 National Insurance contributions (NICs) and Value Add Tax (VAT).

In a freedom of information request obtained by RSM UK, HMRC has confirmed the total number of PLNs issued for a variety of different taxes in the 2024/25 tax year and the corresponding value of these PLNs.

For many of these taxes, it was not possible for HMRC to easily collate this data for earlier years as such information was not previously collated centrally on one system. However, HMRC has provided a comparison of the PLNs relating to NICs for 2024/25 and earlier years. The following data is subject to a caveat that despite the fact all PLNs should be notified centrally, a small minority may have been issued without such notification.

As can be seen from the data, the total value of PLNs issued in the 2024/25 tax year is a little under £84.5m. It can also be seen from the data for PLNs relating to NICs that there has been a significant increase, over 200%, in the value of PLNs issued in 2024/25 compared to the previous year.

The financial implications for directors and other officers of companies can be potentially life changing, with the risk of leading to personal bankruptcy, damaging their reputation and even preventing them taking up similar roles in the future. Whilst the intention of those seeking to trade through difficult economic conditions might be honourable, it could come at a severe personal cost and it is recommended that professional advice is sought.

PLNs may still be considered by some to be a niche threat of enforcement by HMRC but directors and other company officers would be wise to assume otherwise. With HMRC clearly increasing its use of these punitive notices, shareholders and officers of companies should do all they can to ensure that company liabilities are met as it is clear that this type of action is no longer considered a niche threat.

In certain circumstance it may be possible to appeal a PLN if the notice is invalidly issued or the quantum of the notice is wrong. However, it is important that these appeals are made in time, and the grounds are clearly stated. If an appeal is not successfully made HMRC could transfer the liability to its Debt Management team to pursue collection, therefore taxpayers should consult with a specialist at the earliest opportunity to avoid any further negative consequences.

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