CH98670 - Penalties for VAT and excise wrongdoing: other penalty issues: company and company officer penalties: insolvency or imminent insolvency
Once you have attributed the deliberate inaccuracy to one or more of the company officers, if there are grounds to suspect that
- the company may soon become insolvent, or
- the company has becomes insolvent but has not yet been struck off or dissolved,
you must issue the penalty notice to the company and a personal liability notice, see CH406300, to each of the liable officers as a matter of urgency.
Any grounds for suspicion that the company may become insolvent should to be supported by evidence, for example, where there are cash flow problems, insufficient assets to cover liabilities, or evidence of pheonixism.
There is further guidance about insolvency in general in the Insolvency Information Notes.
When the company is likely to become insolvent you do not need to establish whether or not the liable officers gained or sought to gain personally from the deliberate inaccuracy.
Where there are grounds to suspect insolvency, you must pursue payment of all or part of the penalty from all of the liable officers, see CH84610. You should split the company penalty equally between the liable officers, see CH406200.
There may however be circumstances where you have already fully established that one or more liable officers have gained or attempted to gain personally before you suspect that the company may become insolvent. Where this is the case once you suspect that the company may become insolvent, it would be perfectly reasonable to take account of the amount the officer or officers attempted to gain by when issuing the personal liability notices. You must however split any balance equally between the remaining liable officers, see CH406200.
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
If at the time when you are issuing the penalty assessment to the company you have decided that a penalty is not to be apportioned to the company’s officer or officers, you cannot pursue the officer or officers for payment of the penalty later even if the circumstances subsequently change. For example, if the company becomes insolvent or is likely to become insolvent later.
Likewise you cannot change the proportion of the company’s penalty that has already been notified to the officer or officers.
If however you later discover that there is evidence that the company was in fact likely to become insolvent when you issued the company penalty, and you would have issued personal liability notices to the liable officers if you had known this, then you can issue the notices later provided you are in time to do so.
This means that where a company becomes insolvent, or there is a risk that they will go into liquidation, you must act quickly in issuing the penalty assessment and the personal liability notice or notices where the deliberate inaccuracy is attributable to the officer or officers. See CH282100 for guidance on issuing notices where a company becomes insolvent.
You can check the status of a company on the webpage of the Company House Register.
Where there is a risk that the company may be dissolved or wound up before you are able to issue the penalty notice, you should consider lodging an objection to strike off with Companies House. This can be done through the BISTO system. For further guidance see COM42200.
Please also note that where a company has entered into Members Voluntary Liquidation (MVL), the company is not considered to be insolvent or imminently insolvent and it is not appropriate to issue personal liability notices.