Schedule 13 of the Finance Act 2020 introduced one of the most significant expansions of HMRC’s enforcement powers in recent times, enabling it to pierce the corporate veil and pursue company directors, and others connected to a company, for the company’s own unpaid tax debts. The mechanism through which HMRC exercises this power is the Joint and Several Liability Notice (JSLN). For any director or connected individual who receives one, the consequences are immediate and personal: your own assets, your home, and your financial future are placed directly in HMRC’s sights. Understanding what these notices are, when HMRC can issue them, and how they can be challenged is essential. If you have received a JSLN, or have reason to believe one may be issued against you, specialist legal advice from experienced tax dispute solicitors is not a luxury, it is a necessity.
What Is a Joint and Several Liability Notice?
A Joint and Several Liability Notice is a formal legal instrument issued by HMRC under Schedule 13 of the Finance Act 2020. It makes a named individual personally responsible, alongside the company itself, and alongside any other individuals who receive the same notice, for the company’s outstanding tax debt. The phrase “joint and several” is the critical legal concept here: it means that every person named on the notice is independently liable for the full amount. HMRC is not required to divide the debt or pursue each individual proportionately. It can demand the entirety from whichever individual it chooses, and it will choose the person whose assets are most readily available to satisfy the demand. Once a valid notice has been issued and the window for challenge has closed, it is enforceable in the same way as any personal debt, through the courts, against your home, your savings, and your assets.
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The Power HMRC Did Not Previously Have
For most of the history of UK company law, the principle of separate legal personality meant that a company’s debts belonged to the company alone. Directors were generally insulated from personal liability for what the company owed. Schedule 13 of the Finance Act 2020 changes that position fundamentally in circumstances involving tax avoidance, tax evasion, or a pattern of repeated insolvency.
Where HMRC issues a Joint Liability Notice, the named individual becomes jointly and severally liable with the company for its tax debt. HMRC does not need to pursue the company first, wait for insolvency proceedings to conclude, or divide the debt proportionately between multiple directors. It can demand the full amount from whichever individual it chooses, typically the one with the most reachable assets. A director who played a secondary role but has a property portfolio and accessible savings may be pursued for a liability running into millions of pounds while a co-director with no assets faces no immediate action at all.
This is why understanding your precise legal position, and challenging any notice on every available ground, is critical from the moment one lands on your desk.
When Can HMRC Issue a Joint Liability Notice?
HMRC can only issue a JSLN through one of three specific legal gateways set out in Schedule 13. Each has its own conditions, all of which must be satisfied before a valid notice can be issued. A notice that does not meet these conditions is challengeable, and this is where specialist legal analysis pays dividends.
Tax Avoidance and Tax Evasion
This is the most frequently used gateway. Under paragraph 2 of Schedule 13, HMRC may issue a notice where the company has entered into tax avoidance arrangements or engaged in tax evasive conduct, the company is insolvent or faces a serious risk of insolvency, and the individual had a sufficient connection to those arrangements.
That connection is defined broadly and deliberately. It covers individuals who were responsible for the company entering into the arrangements, but it also catches those who simply received a financial benefit arising from them, even if they were not the architect of the scheme. The legislation deems an individual to know anything they could reasonably be expected to know, which removes the protection of wilful ignorance. A director who received remuneration or distributions structured through an arrangement later characterised by HMRC as avoidance may find themselves within scope, regardless of how limited their actual involvement was.
HMRC must also establish that there is, or is likely to be, a tax liability arising from the arrangements, and that there is a serious possibility some or all of that liability will not be paid. Both conditions must be evidenced, not merely asserted, and this is frequently where challenges succeed.
Repeated Insolvency: the “Phoenix” Problem
Paragraph 3 of Schedule 13 targets what is known colloquially as phoenixism: the practice of closing companies with significant unpaid tax debts and restarting under a new corporate vehicle, leaving HMRC as an unsatisfied creditor each time.
For this gateway to apply, HMRC must show that the individual had a relevant connection, as a director, shadow director, or participator, to at least two companies that each became insolvent within the past five years, each carrying unpaid tax debts exceeding £10,000 at the point of insolvency. HMRC must further show that the individual has a relevant connection to a new company with its own outstanding tax position.
Critically, HMRC has a two-year limitation period within which to act, running from when it first became aware of sufficient facts to issue the notice. This is not a detail to overlook, if HMRC has sat on its hands beyond that window, the notice may be legally invalid regardless of whether the underlying conduct is proven. Identifying and arguing this point requires specialists who know where to look.
Facilitating Others’ Avoidance or Evasion
The third gateway, under paragraph 5, applies where a company has incurred penalties for facilitating tax avoidance or evasion by third parties. Individuals connected to such a company, including directors, shadow directors, and participators, may receive personal notices where the company is insolvent or at risk of insolvency and the relevant penalty liability is at risk of going unpaid.
The Financial Reality of a Joint Liability Notice
The scale of personal exposure under a JSLN is frequently underestimated until it is too late. The notice makes the individual personally liable for the company’s full tax debt, including all accrued interest and related penalties. There is no cap. There is no apportionment. If the company owes HMRC £5 million and you are named on a notice, you are personally liable for £5 million, as is any other individual named alongside you, independently and in full.
HMRC will direct its enforcement efforts at whichever individual presents the clearest recovery prospect. Personal bank accounts, investment portfolios, business interests, and family homes are all in scope. In high-value cases, HMRC frequently supplements a JSLN with a Notice of Requirement, a separate but related enforcement instrument demanding a security bond, often backed by a charge over personal assets, before any appeal is even concluded. The combined pressure of a JSLN and a Notice of Requirement is considerable, and navigating both simultaneously without expert legal support is a position no director should be in.
Your Rights to Challenge
Every Joint Liability Notice must by law include an offer of an HMRC internal review and an explanation of the right to appeal to the First-tier Tribunal (Tax Chamber). You have 30 days from receipt of the notice to act on either. This deadline is strict and is not readily extended by the Tribunal.
The Internal Review
An internal HMRC review sees a different officer reconsider the decision. It is a statutory right and costs nothing to invoke, but it would be unrealistic to expect HMRC to cancel a notice it has invested significant resource in issuing. The review is best approached as a procedural step, useful for preserving options and gathering HMRC’s reasoning in writing, rather than a primary route to resolution.
The First-tier Tribunal Appeal
The appeal to the First-tier Tribunal is where a JSLN is properly contested. The Tribunal has full jurisdiction to cancel the notice, reduce the liability specified, or vary its terms. Importantly, the burden of proof falls on HMRC, it must satisfy the Tribunal that each of the required conditions was met. A well-constructed appeal, grounded in the specific facts and supported by expert legal and forensic accounting analysis, gives the individual their strongest possible platform. This is why early instruction of specialist solicitors and barristers is so important, building that appeal takes time, and the window is short.
The Strongest Grounds for Challenge
Many Joint Liability Notices are successfully challenged, reduced, or negotiated down. The most productive lines of attack include the following.
Challenging HMRC’s evidence that the statutory conditions are satisfied, particularly whether the individual had the requisite knowledge, involvement, or connection to the relevant arrangements. Contesting the characterisation of the arrangements as avoidance or evasion in the first instance. Arguing that there was no genuine serious possibility of insolvency or non-payment at the time of issue. Identifying procedural failings in the notice itself, such as inadequate reasons or the omission of required information, deficiencies that can render a notice legally defective. Invoking the two-year limitation period under the repeated insolvency gateway where HMRC has delayed. Challenging the quantum of the underlying tax liability through forensic accountancy, which in turn reduces or eliminates the personal exposure under the notice.
Each of these arguments requires detailed analysis of the notice, the underlying tax position, and the individual’s specific circumstances. This is not a process that lends itself to general advice. Specialist, case-specific guidance from the outset is what makes the difference between a successful challenge and an unchallenged personal liability.
What Happens Without a Successful Challenge
If a JSLN is not challenged within the 30-day window, it becomes enforceable in the same manner as any personal debt. HMRC can then obtain county court judgments, apply for charging orders against property, and, in serious cases, petition for the individual’s bankruptcy. A bankruptcy order carries consequences that extend far beyond the tax liability itself, including loss of directorships, restrictions on professional activities, and lasting damage to personal and business reputation.
Running alongside all of this, HMRC frequently refers cases to the Insolvency Service for director disqualification proceedings under the Company Directors Disqualification Act 1986. A disqualification order can prevent an individual from acting as a director for up to 15 years. These are not remote risks, they are well-established features of HMRC’s enforcement strategy in Schedule 13 cases.
Instruct Expert London Lawyers
LEXLAW’s tax disputes team brings together solicitors and barristers in a single, integrated practice. We advise directors, shadow directors, and connected individuals who have received Joint Liability Notices or Notices of Requirement, and we represent clients before the First-tier Tribunal and, where necessary, the Upper Tribunal and in judicial review proceedings.
Our approach combines technical expertise in tax law with the kind of clear, strategic thinking that high-stakes enforcement disputes demand. We do not overstate prospects, and we do not encourage litigation that is unlikely to succeed. Where a notice has genuine grounds for challenge, we pursue them vigorously and thoroughly. Where the better outcome lies in negotiation, we bring the same rigour to that process.
If you have received a Joint Liability Notice, or believe you may be in HMRC’s sights, contact LEXLAW without delay. The 30-day deadline is not theoretical, and the earlier we can assess your position, the more tools we have available. Instructing the right lawyers at the outset is the most important decision you will make in this process.
Want legal advice from Tax Solicitors on your case?
Our simple enquiry form goes immediately to our tax litigators in Middle Temple, London. Call us on +442071830529 from 9am-6pm.
Frequently Asked Questions: Schedule 13 Finance Act 2020 and Joint Liability Notices
What is a Joint Liability Notice and how is it different from a personal liability notice?
A Joint Liability Notice (JSLN) is a statutory instrument under Schedule 13 of the Finance Act 2020. It renders the named individual jointly and severally liable with the company (and any other individuals on notices) for a specified tax debt. Unlike some other personal liability regimes in tax or insolvency law, a JSLN does not merely create a secondary obligation contingent on the company’s failure to pay — it immediately establishes a co-primary liability for the full amount. The individual becomes a co-debtor with the company from the moment the notice is validly issued and the appeal window closes without a successful challenge.
Can I be liable under Schedule 13 even if I was not the main director responsible for the tax avoidance?
Yes. The legislation is drafted broadly enough to catch individuals who received a financial benefit arising (wholly or partly) from avoidance arrangements, provided they knew or ought reasonably to have known of the connection. It also captures those who “assisted with or facilitated” the arrangements, even without primary responsibility. A director who approved accounts reflecting benefits from an avoidance scheme, or who received remuneration structured through such a scheme, may be within scope even if another director was the main architect. This is why early legal analysis is essential — the extent of your involvement must be assessed against the statute’s precise language.
I was only a director for a short period. Can HMRC still issue a notice against me?
The legislation requires that the individual had the relevant connection (directorship, shadow directorship, or participator status) “at the time” the conduct occurred — not at the time the notice is issued. A director who held office during the period in which avoidance arrangements were entered into, or during which the pattern of insolvency arose, may be within scope even if they resigned years before the notice is issued. The length of tenure is a relevant factual consideration but is not in itself a complete defence.
What does “repeated insolvency” mean, and how many companies are required?
For the repeated insolvency gateway under paragraph 3 of Schedule 13, HMRC requires that the individual had a “relevant connection” to at least two companies that each became subject to an insolvency procedure during the five-year period ending on the date of the notice, with each having had outstanding tax of more than £10,000. Additionally, HMRC must show the individual has a relevant connection to a further “new company” with its own tax liability. This three-company structure (two old, one new) must be satisfied before the gateway can be engaged.
What is the time limit for HMRC to issue a notice under the repeated insolvency gateway?
Under paragraph 3(2) of Schedule 13, a notice may not be issued after the end of the period of two years beginning with the day on which HMRC first became aware of facts sufficient for them reasonably to conclude that the relevant conditions are met. If HMRC became aware of the relevant facts more than two years before issuing the notice, the notice may be invalid regardless of whether the substantive conditions are otherwise satisfied. Verifying this limitation period should be among the first steps taken upon receiving a notice.
How do I appeal a Joint Liability Notice, and what are my chances?
You must request a review or lodge an appeal with the First-tier Tribunal (Tax Chamber) within 30 days of receiving the notice. The Tribunal has power to cancel or vary the notice on the merits. Prospects depend entirely on the specific facts: the strength of HMRC’s evidence, the clarity of the conditions, and the availability of procedural or substantive grounds of challenge. In cases involving complex or novel avoidance schemes, disputed shadow directorship, or questionable quantification, there are often significant prospects. Instructing specialist tax dispute solicitors such as LEXLAW at the outset is critical — strategic decisions made in the first 30 days can make the difference between a successful challenge and an unchallenged personal liability.