Personal Liability Notices for Company Penalties: Paragraph 19 Schedule 24

When a company is charged a penalty for a deliberate inaccuracy, HMRC can reach through the corporate veil and make a director or other officer personally liable for it. The mechanism, a personal liability notice under paragraph 19 of Schedule 24 FA 2007, is increasingly used, particularly where the company is insolvent. This guide analyses the statutory conditions, the attribution and apportionment questions, the allocation of the burden of proof and the defences available, drawing on the framework applied in Jason Andrew v HMRC [2016] UKFTT 295 (TC).

Why PLNs Matter

A personal liability notice (PLN) transfers liability for a company’s penalty onto an individual officer. The practical significance is acute: companies that incur deliberate-inaccuracy penalties are frequently insolvent or close to it, so HMRC’s realistic prospect of recovery lies with the director personally. A PLN can therefore convert a company liability the director assumed was contained within the corporate structure into a personal debt of up to 100% of the penalty. Because the amounts are often large, in Jason Andrew the PLN was for £281,805 and because the notice carries reputational and insolvency consequences for the individual, the conditions for a PLN must be scrutinised carefully.

The Paragraph 19 Conditions

Paragraph 19(1) of Schedule 24 FA 2007 provides that where a penalty under paragraph 1 is payable by a company for a deliberate inaccuracy which was attributable to an officer of the company, the officer is liable to pay such portion of the penalty (which may be 100%) as HMRC may specify by written notice. Three conditions must therefore be satisfied:

1. A paragraph 1 penalty is payable by the company , i.e. the company gave HMRC an inaccurate document leading to an understatement of tax, a false or inflated loss or a false or inflated repayment claim;
2. The inaccuracy was deliberate , paragraph 19 does not apply to careless inaccuracies; and
3. The deliberate inaccuracy was attributable to the officer on whom the notice is served.

Paragraph 19(2) caps total recovery at 100% of the penalty (relevant where the inaccuracy is attributable to more than one officer). The same architecture appears in the parallel officer-liability provisions for failure-to-notify penalties under Schedule 41 FA 2008.

The Deliberate Inaccuracy Requirement

Paragraph 19 is engaged only where the company’s penalty is for a deliberate inaccuracy, not a careless one. This is the single most important feature of the provision for defence purposes. If the company’s behaviour was careless (a failure to take reasonable care), there can be no PLN under paragraph 19 at all, however culpable the officer’s carelessness. Defeating the deliberate characterisation of the company’s inaccuracy therefore defeats the personal liability notice entirely.

“Deliberate” here bears the same subjective meaning analysed in our guide on the meaning of deliberate behaviour: following HMRC v Tooth [2021] UKSC 17 and Auxilium [2016] UKFTT 249, a deliberate inaccuracy requires that the maker knew the document was inaccurate (or was reckless), intending HMRC to rely on it. Because a company acts through individuals, the deliberateness of the company’s inaccuracy and its attribution to a particular officer are frequently the same factual inquiry, but they remain distinct conditions.

Attribution to an Officer

The second key battleground is whether the deliberate inaccuracy was “attributable to” the officer served. Attribution requires a real connection between the officer and the deliberate inaccuracy, it is not enough that the person happened to be a director. The questions include: who actually caused or was responsible for the inaccurate document? Did the officer know of, direct or deliberately bring about the inaccuracy? Where there are multiple directors, which of them was responsible and to what extent?

A director who was genuinely unaware of the inaccuracy, who was not involved in the relevant transactions or the preparation of the document or who reasonably relied on others, may be able to show that the deliberate inaccuracy is not attributable to them. Conversely, the “directing mind” behind the inaccurate return will struggle to escape attribution. The analysis is fact-intensive and turns on each officer’s actual role and state of mind.

Who Is an “Officer”

Paragraph 19(3) defines “officer,” for a body corporate other than an LLP, as a director (including a shadow director within the meaning of section 251 of the Companies Act 2006), a manager and a company secretary. Different definitions apply to limited liability partnerships and to other bodies. Two practical points follow. First, the net extends beyond formally appointed directors to shadow directors, those in accordance with whose directions the board is accustomed to act and to managers. Second, a PLN served on a person who does not fall within the relevant definition or to whom the inaccuracy is not attributable, is open to challenge on that basis alone.

The Portion and Apportionment

Paragraph 19 does not require HMRC to transfer the whole penalty; it permits HMRC to specify “such portion…(which may be 100%)” as it decides. Where a deliberate inaccuracy is attributable to more than one officer, HMRC may apportion the penalty between them, subject to the 100% aggregate cap in paragraph 19(2). The specified portion is itself appealable (see below), so an officer can challenge not only whether any PLN should have been issued but also the size of the portion attributed to them, for example, where responsibility was shared with a more culpable co-director.

Burden of Proof

Because a PLN is the transfer of a penalty, the burden of establishing the conditions for it rests on HMRC: HMRC must prove the company’s deliberate inaccuracy and its attribution to the officer, to the civil standard. However, where the officer seeks to challenge the underlying tax liability reflected in the penalty, the position is more nuanced following the Court of Appeal’s decision in HMRC v Sintra Global [2025] EWCA Civ 1661, the legal burden on the underlying-liability component rests on the taxpayer. We analyse this in detail in our guide on the burden of proof in HMRC penalty appeals. The practical message is to hold HMRC to proof on deliberateness and attribution, while building the officer’s own positive case on any underlying-liability challenge.

Appeal Rights and the Tribunal’s Powers

Schedule 24 confers full appeal rights. An officer may appeal both against the decision that a PLN is payable and against the amount (the portion) specified. The appeal is treated in the same way as an appeal against an assessment to the underlying tax, including the provisions for HMRC review and determination by the First-tier or Upper Tribunal. On an appeal against the decision that the penalty is payable, the tribunal may affirm or cancel HMRC’s decision. On an appeal against the amount, the tribunal may affirm HMRC’s decision or substitute another decision that HMRC had power to make. Where the tribunal substitutes its own decision, it may apply the special-reduction power in paragraph 11 to the same or a different extent, but it can only depart from HMRC’s view on special reduction if that view was “flawed” in the judicial-review sense.

Defences and Mitigation

• Not deliberate. Show the company’s inaccuracy was careless rather than deliberate; paragraph 19 then does not apply at all. This is usually the strongest line, see the deliberate behaviour test.
• Not attributable to this officer. Demonstrate that the deliberate inaccuracy was not caused by, known to or directed by the officer served, for example, where another director was the directing mind or the officer reasonably relied on others.
• Not an “officer.” Challenge whether the person falls within the paragraph 19(3) definition.
• Excessive portion. Where the inaccuracy is attributable to several officers, argue for a reduced portion reflecting the officer’s actual responsibility.
• Quantum of the underlying penalty. Challenge the company penalty itself, the potential lost revenue, the behaviour categorisation and the level of reductions for disclosure, since the PLN can be no larger than the portion of a correctly calculated penalty.
• Special reduction. Consider paragraph 11 special circumstances, reviewable by the tribunal where HMRC’s decision was flawed.
• Procedural validity. Check that the notice was correctly issued in writing, specifies the portion and is properly served.

Practitioner Checklist

1. Confirm the company penalty is for a deliberate inaccuracy under paragraph 1, if it is careless, no paragraph 19 PLN can be issued.
2. Test the deliberate characterisation on Tooth/Auxilium principles; defeating it defeats the PLN.
3. Scrutinise attribution , was the deliberate inaccuracy actually caused by, known to or directed by this officer?
4. Check the officer definition in paragraph 19(3), including shadow directors and managers.
5. Examine the portion , is 100% justified or should responsibility be shared with a more culpable co-director?
6. Map the burden , HMRC proves deliberateness and attribution; the taxpayer bears any underlying-liability challenge (Sintra Global).
7. Challenge the quantum of the underlying company penalty (PLR, behaviour, disclosure reductions).
8. Consider special reduction under paragraph 11 and the “flawed” review standard.
9. Check procedural validity and the 30-day appeal deadline; see our guide on late appeals if it has passed.

Frequently Asked Questions