The FT reports that the government published draft legislation last month to counter tax abuse where companies exploit the insolvency rules to avoid or evade paying their tax liabilities.
"Phoenixism" is where the directors resurrect essentially the same business but in a different guise.
The new measure will allow HMRC to issue persons that controlled the company, and were responsible for or benefited from the avoidance or evasion of taxes, with a joint and several liability notice.
Any tax liabilities will then be the joint and several liability of the directors and the company.
This is a very important change in the way company liabilities are viewed by HMRC and will no doubt result in the erosion of the concept of ‘limited liability’ for directors and shareholders, in certain circumstances, where it is suspected that the directors have no intention of paying the taxes owed.
Traditionally, HMRC have kept a close eye on trades that were associated with tax evasion and were known to sidestep tax liabilities by going into liquidation rather than pay the taxes due.
The new powers allow HMRC to issue a joint and several liability notice to the persons controlling the company where there is a “serious risk” that the company will enter into insolvency, and there is a “serious possibility” that some or all of the liabilities will not be paid.
The company does not necessarily need to have begun insolvency proceedings for the notice to be raised.
Let us trust that HMRC will not be overzealous when using its pre-emptive powers!
Tax does have to be taxing.
Professional Cover Against the Threat of Costly TAX and VAT Investigations
Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.
Ken Frost has negotiated a 10% discount on any polices that may suit your needs.
However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.
What is Solar Tax Investigation Insurance?
Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.
To find out more, please use this link Solar Tax Investigation Insurance
HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"