A personal liability notice (PLN) makes a company officer personally liable for National Insurance contributions the company failed to pay, where HMRC considers the failure was due to that officer’s fraud or neglect. The power is in section 121C of the Social Security Administration Act 1992, it covers contributions with related interest and penalties but not PAYE income tax, and it does not require the company to be insolvent. The officer can appeal within 30 days, and on appeal the burden of proof is on HMRC.

What debts can a personal liability notice cover?

Section 121C applies where a body corporate has failed to pay contributions on time and the failure appears to HMRC to be attributable to fraud or neglect by one or more of its officers. HMRC’s National Insurance Manual (NIM12202) says “contributions” includes primary and secondary Class 1, Class 1A and Class 1B contributions, plus related interest and penalties. NIM12201 adds that the power covers all the company’s unpaid contributions arising after 6 April 1999, not only those due on the directors’ own pay.

Two points are easy to miss. First, a PLN reaches National Insurance only. Unpaid PAYE income tax, VAT and Corporation Tax are outside section 121C, although they may be caught by a joint and several liability notice where insolvency and avoidance, evasion or repeated failures are involved. Second, nothing in section 121C requires a liquidation. HMRC’s manual says it may consider a PLN for a liquidated company and for a live company with unpaid contributions.

Who can receive one?

Section 121C(9) defines an officer as any director, manager, secretary or similar officer, or anyone purporting to act as one, and where members manage the company, any member exercising management functions. NIM12203 explains that HMRC typically targets formally appointed directors and company secretaries, but the words “purporting to act as such” bring in shadow and de facto directors and anyone substantially managing the company’s affairs. The officer must have held that role at the time of the fraud or neglect, so resigning later does not remove exposure for the earlier period.

What counts as fraud or neglect?

Neglect is not defined in the legislation. In HMRC v O’Rorke (FTC/39/2012) the Upper Tribunal treated it as an objective test: did the officer fail to do what a reasonable person would have done? HMRC accepts that on that test almost any late payment could be called neglect, so its stated practice (NIM12204) is to issue a PLN only where it believes the failure was due to fraud or serious neglect. The manual lists factors that point to serious neglect:

  • no PAYE or National Insurance paid for the whole period of trading, or non payment over a long period
  • payments to officers, connected people or associated businesses while contributions went unpaid
  • contributions knowingly and deliberately withheld
  • officers linked to other businesses that failed to pay PAYE and National Insurance
  • phoenix company patterns
  • other creditors being paid while HMRC was not
  • contributions used to fund trading or cash flow
  • creating a large liability with no realistic prospect of paying it, such as declaring salary to clear an overdrawn director’s loan account just before liquidation

Fraud is described at NIM12205 as generally meaning falsification with intent to deceive. HMRC says the burden of proof rests with it, on the civil standard of the balance of probabilities.

How is the debt shared between officers?

If HMRC considers only one officer culpable, the notice is for the whole amount. If there are several, each notice specifies a proportion reflecting that officer’s culpability compared with all the culpable officers, and HMRC may consider both the gravity and the consequences of each person’s conduct (section 121C(3) and (4)). Interest runs from the date the notice is issued.

The company remains liable alongside the officers. Anything an officer pays reduces the company’s liability, and if the company or its liquidator pays some of the debt, HMRC must reduce each officer’s liability and serve a further notice. If an officer has already paid more than the reduced amount, the difference is repaid with interest. HMRC recovers the amount in the same way as a Class 1 contribution.

NIM12211 gives this example. A company in liquidation owes £60,000 of Class 1 contributions. HMRC apportions 75% (£45,000) to the director largely responsible and 25% (£15,000) to a second director who knew about it. The liquidator then pays a £10,000 dividend towards the National Insurance debt, reducing it to £50,000, so amended notices are issued for £37,500 and £12,500.

Who investigates, and what should an officer expect?

PLN enquiries are carried out by a specialist PLN team rather than by general debt staff (NIM12207). The government assured Parliament when the power was introduced that a small, highly trained team would investigate the facts fully before any notice was issued. The investigation looks at why the company did not pay, what money went where, and who made the decisions. Directors should keep board minutes, cash flow forecasts and evidence of attempts to agree a time to pay arrangement, because these are what show reasonable conduct.

How do you appeal a personal liability notice?

Section 12 of the Social Security Contributions (Transfer of Functions, etc.) Act 1999 requires a written notice of appeal within 30 days after the date the decision was issued, sent to the officer who issued it and stating the grounds. NIM12212 says the appeal goes first to HMRC, and the officer can ask for the disputed amount to be postponed while it is resolved. Section 121D allows four grounds:

  1. all or part of the amount is not contributions to which section 121C applies
  2. the failure to pay was not attributable to fraud or neglect by that individual
  3. the individual was not an officer at the time
  4. HMRC’s opinion on sole culpability or on the apportionment was unreasonable

HMRC must send a copy of the notice of appeal to every other officer served with a PLN within 28 days. On appeal the burden of proof on each ground is on HMRC. Where an appeal relies on evidence HMRC did not consider, or challenges the apportionment, the tribunal can dismiss it or send the case back to HMRC with recommendations. For the general route, see HMRC statutory review and the tax tribunal.

How does a PLN fit with other personal liability rules?

A PLN is one of several exceptions to limited liability. Reusing an insolvent company’s name can create liability under the prohibited names rules. The overview in when directors are personally liable compares them. A PLN is different because HMRC issues it directly, without a court action, and it targets a specific failure to pay National Insurance.

What mistakes expose directors to a PLN?

  • Treating PAYE and National Insurance deductions as working capital when cash is tight.
  • Paying suppliers or themselves while leaving HMRC unpaid, which HMRC lists as a sign of serious neglect.
  • Voting a large salary before liquidation to clear a loan account, creating National Insurance the company cannot pay.
  • Assuming that a non executive or informal role gives protection, when anyone purporting to act as a director can be an officer.
  • Missing the 30 day appeal deadline, or appealing without addressing the specific statutory grounds.

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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.