When a company is charged a penalty for a deliberate inaccuracy in a return or document, HMRC can make the director or other officer responsible pay some or all of that penalty personally, under paragraph 19 of Schedule 24 to the Finance Act 2007. HMRC’s policy is to do this only where the officer gained or tried to gain personally from the inaccuracy, or the company is insolvent or likely to become insolvent. The penalty is still assessed on the company, and HMRC cannot collect more than 100% of it in total.

What does paragraph 19 allow HMRC to do?

Paragraph 19(1) of Schedule 24 FA 2007 applies where a penalty under paragraph 1 is payable by a company for a deliberate inaccuracy which was attributable to an officer of the company. The officer is then liable to pay such portion of the penalty, which may be 100%, as HMRC specify by written notice to the officer. Paragraph 19(2) prevents HMRC recovering more than 100% of a penalty.

HMRC’s Compliance Handbook stresses that the penalty is always assessed on the company, because it is the company’s return that contains the inaccuracy. Officers are not assessed; each liable officer receives a personal liability notice, which is treated procedurally as a penalty notice (CH84610). If the company pays the penalty, that is the end of the matter and HMRC does not pursue the officers (CH84655).

The power only applies to deliberate inaccuracies. A careless error in a company return can lead to a penalty on the company, but not to officer liability under paragraph 19.

Who counts as an officer, and what counts as a company?

For a body corporate other than a limited liability partnership, paragraph 19(3) defines “officer” as a director, including a shadow director within the meaning of section 251 of the Companies Act 2006, a manager, or a secretary. For an LLP, every member is an officer (paragraph 19(3A)). In any other case, such as an unincorporated association, it also includes any other person managing or purporting to manage the company’s affairs (paragraph 19(4)).

“Company” has a wide meaning in paragraph 19(6): any body corporate or unincorporated association, but not a partnership, a local authority or a local authority association. Clubs and societies are therefore within scope. The rules on who is treated as a director in fact are covered in shadow and de facto directors.

When will HMRC actually issue a notice?

The statute is broad, but HMRC’s guidance narrows it. Under CH84610 and CH84615, a caseworker can only consider officer liability where:

  1. the company is liable to a penalty for a deliberate inaccuracy;
  2. the inaccuracy is attributable to the action of one or more officers; and
  3. either the officer gained or attempted to gain personally from the inaccuracy, or the company is insolvent or there are grounds to suspect it may become insolvent.

HMRC must not issue officer notices in any other circumstances. Signing the return is not in itself evidence that the inaccuracy is attributable to that officer (CH84615). The caseworker must establish each officer’s personal involvement and should ask them directly, after making sure they are aware of their rights under Article 6 of the Human Rights Act.

On personal gain, CH84635 says normal recorded salary, wages or dividends are not usually regarded as gaining personally from the inaccuracy, unless the inaccuracy was a failure to make proper deductions from that officer’s pay. Suspected insolvency must be supported by evidence such as cash flow problems, insufficient assets or signs of phoenix activity (CH84645).

Timing is decisive. If HMRC decides when it assesses the company that the penalty is not to be apportioned to any officer, it cannot later pursue the officers even if the company subsequently fails, unless it later finds evidence that insolvency was already likely at the time (CH84635 and CH84645). HMRC also cannot assess a penalty on a company once it has been struck off or dissolved, so it acts quickly when insolvency looms. The time limit for a personal liability notice is the same as for the underlying penalty (CH84610).

How is the penalty split between officers?

Where officers gained personally, CH406200 apportions the penalty in proportion to each officer’s gain or attempted gain. HMRC’s example: three directors cause a deliberate inaccuracy with potential lost revenue of £100,000 and a company penalty of £50,000. If they gained £30,000, £10,000 and £60,000, their combined gain equals the total, so between them they pay the whole £50,000 in the proportions 30%, 10% and 60%, giving £15,000, £5,000 and £30,000. If instead they gained £10,000, £10,000 and £20,000, they pay £5,000, £5,000 and £10,000, and the company remains liable for the other £30,000.

Where the company is or is likely to become insolvent, the penalty is normally divided equally between the liable officers, without first establishing personal gain. HMRC’s example is a £4,000 company penalty attributable to two officers, each of whom is liable for £2,000. HMRC must not increase one officer’s share because another fails to pay (CH84655); if all recovery options against an officer are exhausted, HMRC reverts to collecting from the company.

How large can the penalty be?

The officer’s share is a portion of the company’s inaccuracy penalty, so the starting point is paragraph 4 of Schedule 24. For a domestic (category 1) inaccuracy, the maximum penalty is 70% of the potential lost revenue for deliberate but not concealed action and 100% for deliberate and concealed action, rising to 140% and 200% for category 3 offshore inaccuracies. Reductions for disclosure apply at company level. The full penalty framework is explained in HMRC penalties for tax return errors.

How can an officer challenge a notice?

Paragraph 19(5) applies the normal penalty machinery to the specified portion. The officer must pay within 30 days beginning with the day the notice is given, and the appeal provisions apply as if HMRC had decided a penalty of that amount is payable by the officer. CH84665 explains what can and cannot be challenged:

An officer can appeal against An officer cannot appeal against
Whether the deliberate inaccuracy is attributable to them HMRC’s decision that they gained or attempted to gain personally
The amount of the penalty allocated to them HMRC’s decision that the company is likely to go into liquidation
Circumstances with a direct bearing on their share, if the company is not appealing the company penalty The amount of the penalty assessed on the company, which only the company or its insolvency practitioner can appeal

The outcome of an officer’s appeal has no effect on the company penalty. Appeals then follow the usual review and tribunal route.

Does the same apply to failure to notify and VAT wrongdoing?

Yes. Paragraph 22 of Schedule 41 to the Finance Act 2008 contains a parallel rule: where a penalty for failure to notify, or for certain VAT and excise wrongdoing, is payable by a company for a deliberate act or failure attributable to an officer, HMRC can require the officer to pay a portion, up to 100%. HMRC applies the same personal gain or insolvency conditions (CH75520 and CH98550). The wrongdoing penalties cover issuing an invoice showing VAT when not authorised to do so, misusing a product so that it attracts a higher rate of excise duty, handling goods subject to unpaid excise duty, and disposing of material at an unauthorised waste site.

How does this differ from other personal liability rules?

Paragraph 19 moves a penalty, not the tax, onto the officer. Other regimes reach further. A personal liability notice under section 121C of the Social Security Administration Act 1992 can transfer unpaid National Insurance where the failure is due to an officer’s fraud or neglect. A joint and several liability notice under Schedule 13 to the Finance Act 2020 can make an individual liable for the company’s tax itself in avoidance, evasion or repeated insolvency cases, and HMRC’s guidance tells caseworkers to consider whether that route is more appropriate (CH406100). For the full picture see when directors are personally liable.

What are the common mistakes?

  • Assuming limited liability protects a director from penalties. It does not where the deliberate inaccuracy is attributable to them.
  • Treating resignation as an escape. The test looks at who was responsible for the inaccuracy, not who is currently on the register.
  • Letting the company appeal the penalty while the director ignores their own notice. The officer’s notice must be appealed separately, within the time limit.
  • Accepting a “deliberate” categorisation at company level to close the enquiry quickly, without considering the knock on exposure for individual directors.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.