Accountants should be aware that company directors can find themselves personally liable for penalties applied to late or non-payment of their company’s VAT.
When a company is liquidated any outstanding VAT does get written off. However in certain circumstances, penalties can be transferred to the company director(s).
Directors and managing officers of limited companies are not normally personally liable for company debts. However, the Revenue states on their website that:
“…a civil penalty for fraudulent evasion of VAT may be transferred, in whole or in part, from a company to a director or managing officer of a company where there is evidence to show that the conduct giving rise to the penalty is attributable to the dishonesty of the director or managing officer…”
If a penalty is imposed, the Revenue says that it must enforce it even if there is little prospect of payment. If it does not enforce the penalties it is their view that the dishonest company directors and officers may well decide to liquidate the company with the penalty and simply move on to form new companies.
We currently have a number of on-going cases where we are in discussions with the Revenue over this issue.
If you would like any advice on this, or any Insolvency-related matter, please call us on 0161 907 4044 or use our Contact Form