Most directors assume limited liability protects them from company tax debts. In most circumstances, it does. But HMRC has specific statutory powers that can pierce that protection — and in 2026, enforcement activity in this area has significantly increased.
What Is a Personal Liability Notice?
A Personal Liability Notice (PLN) is a statutory notice issued by HMRC under section 121C of the Social Security Administration Act 1992. Its effect is to transfer specific unpaid company tax liabilities — most commonly unpaid Class 1 National Insurance contributions — directly onto a named director personally. The company's insolvency, dissolution or striking off does not extinguish the liability.
When Can HMRC Issue a PLN?
HMRC can issue a PLN where it can demonstrate that the company's failure to pay was attributable to the fraud or neglect of the named individual. "Neglect" does not require deliberate wrongdoing — a director who allowed tax liabilities to accumulate without taking steps to address them can be shown to have neglected their responsibilities. PLNs are most commonly issued for unpaid NI contributions, unpaid PAYE, and CIS deductions not passed to HMRC.
Joint and Several Liability Notices
The Finance Act 2020 introduced Joint and Several Liability Notices (JLNs) targeting directors involved in a pattern of company failures — what HMRC calls "phoenixism." Where a JLN is issued, the named director becomes jointly and severally liable for the new entity's tax debt alongside the entity itself.
CIS Reform from April 2026
From 6 April 2026, changes to the Construction Industry Scheme have extended personal liability for directors further. Directors of contracting companies can now be held personally liable for CIS non-compliance concerns where HMRC determines the company "knew or should have known" about subcontractor compliance failures. Directors in construction, civil engineering, and related contracting businesses should review CIS compliance arrangements urgently.
HMRC Enforcement in 2026
HMRC's enforcement focus includes: increased use of PLNs and JLNs across sectors with high insolvency rates; expanded use of Managed Service Company legislation against umbrella company arrangements; and heightened scrutiny of offshore NI reduction arrangements. Directors of companies with material PAYE, NI or VAT arrears — particularly in construction, hospitality, labour supply and professional services — are in the highest-risk category.
What to Do If You Receive a PLN
Do not respond to HMRC without taking legal advice first. Key points: - A PLN must be issued within a statutory time limit — missed windows can be challenged - The "fraud or neglect" standard must be properly established — errors in PLN notices are a basis for successful challenge - There is a right of appeal — but it must be pursued through correct procedural steps - Even where a PLN cannot be challenged on legal grounds, there may be scope for a commercial settlement
Directors who receive a PLN, JLN, or any HMRC correspondence suggesting personal exposure should treat it as urgent. Act immediately on receipt, not after the deadline has passed.
Protecting Yourself Going Forward
- Ensure PAYE and NI are correctly calculated and paid on time every month
- If the company is experiencing cash flow difficulties, communicate with HMRC rather than letting arrears accumulate
- For CIS businesses, maintain proper subcontractor verification records and document compliance oversight
- If your company has failed previously and you are starting a new business, take specific advice on JLN risk before trading begins
Bonsai Law advises directors on HMRC enforcement, Personal Liability Notices, and personal tax exposure. If you have received a PLN or any HMRC notice suggesting personal liability, contact us immediately.
Related reading