HMRC holds director liable for unpaid NICs

Background and Case Overview

The First-tier Tribunal Tax Chamber delivered its judgment on 6 March 2025 in the case of John Strange vs The Commissioners for His Majesty's Revenue and Customs (HMRC), addressing the issue of unpaid National Insurance Contributions (NICs) by S&M Property Maintenance Scotland Limited. The tribunal upheld HMRC's decision to issue a Personal Liability Notice (PLN) to Mr Strange, the sole director of the company, making him personally liable for the unpaid contributions.

Preliminary Matters

The hearing, which took place on 28 February 2025, was marked by the absence of Mr Strange, who had failed to attend due to an alleged misunderstanding over the hearing date. Despite this, the tribunal proceeded with the hearing, noting that Mr Strange had been duly notified and had chosen not to attend.

Key Issues and Findings

The tribunal examined whether the company's failure to pay NICs was attributable to neglect on Mr Strange's part. It found that Mr Strange, as the sole director, was responsible for all financial aspects of the company, including the payment of NICs. Despite being aware of his obligations, Mr Strange prioritised other payments over the company's statutory duties to HMRC.

Evidence and Submissions

HMRC presented evidence showing that no payments were made towards NICs from August 2016 to May 2018, despite deductions being made from employees' wages. The tribunal considered Mr Strange's explanations, including financial difficulties and threats from employees, but found these insufficient to justify the non-payment.

Legal Framework

The tribunal applied the objective test for neglect, as established in case law, determining that Mr Strange's actions fell below the standard expected of a reasonable director. It concluded that his failure to pay NICs was due to neglect, not external circumstances.

Conclusion and Implications

The tribunal dismissed the appeal, confirming the PLN issued by HMRC. This decision underscores the personal liability directors can face when failing to meet statutory obligations, highlighting the importance of prioritising payments to HMRC.

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