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Personal liability for company’s VAT bill

30 November 2021 / Kevin Hall
Issue: 4819 / Categories: Comment & Analysis
65740
Whose liability?

Key points

  • HMRC has a power to impose penalties on individuals for VAT inaccuracies made by a limited company if it closes down.
  • Failure to act resulted in the company VAT penalty becoming the taxpayer’s personal liability in Osman.

Businesses challenged by HMRC often find themselves unable to continue and look to close down or sell. On 20 October 2021 a First-tier Tribunal decision highlighted that certain VAT-related debts can become liabilities for individuals in a personal capacity.

The company was Salford Santos Kebab Ltd. HMRC had decided in 2019 that the company a takeaway business had declared unrealistically high zero-rated supplies (averaging 84% of sales) and assessed the company for £56 140 considering 99% of sales to be standard rated. The company entered voluntary liquidation.

With a limited liability company the expectation is that all liabilities are contained within the company and the individuals involved...

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