James Jenkins-Yates v The Commissioners for HMRC [2026] UKFTT 480 (TC)

[2026] UKFTT 00480 (TC)Case No TC 09829
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 9 December 2025Date Judgment date: 27 March 2026
[Taylor House]
Appeal reference: TC/2024/06573
NATIONAL INSURANCE CONTRIBUTIONS – personal liability notice – whether the company’s failure to pay national insurance contributions was attributable to ‘neglect’ on the part of the director – section 121C of the Social Security Administration Act 1992 – a standard of conduct and an ‘objective’ test – comparing the actions of the particular individual with the actions that would be taken by a ‘reasonable’ and ‘prudent’ individual in similar circumstances – Appeal dismissed
Before
JUDGE NATSAI MANYARARADR CAROLINE SMALL
Between
JAMES JENKINS-YATESAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentMr Andrew Hackett of Counsel for AppellantMr Perry Lucas, Litigator of HM Revenue and Customs’ Solicitor’s Office for RespondentsDECISION

Introduction

[1]This appeal concerns the failure by Houst Holdings Limited (“the Company”) to pay National Insurance Contributions (“NICs”). During the period 1 November 2020 to 31 August 2021, the Company received a total of £47,280.85 in Coronavirus Job Retention Scheme (“CJRS”) payments (“the Support Payments”), which included sums paid specifically in respect of the NICs due for furloughed employee salaries.[2]The Appellant (James Jenkins-Yates) appeals against a Personal Liability Notice (“PLN”) issued to him by HMRC on 4 March 2024, pursuant to s 121C of the Social Security Administration Act 1992 (“SSAA 1992”), in respect of the unpaid NICs. At all material times, the Appellant was the sole director of the Company, and the sole signatory of the Company bank account. The PLN was issued on the basis that Class 1 NICs were not paid by the Company for the period 6 August 2020 to 5 November 2021 (“the relevant period”). The total amount of unpaid contributions claimed by HMRC under the PLN is £59,947.48; which comprises unpaid NICs of £57,530.25 and statutory interest of £2,417.23. The unpaid NICs arose as follows: Tax Year NICs due NICs paid NICs unpaid Statutory interest Total unpaid 2020-21 (06.08.20-05.04.21) £36,694.07 £0.00 £36,694.07 £1,899.34 £38,592.41 2021-22 (06.04.21-05.11.21) £20,836.18 £0.00 £20,836.18 £517.89 £21,354.07 Total £57,530.25 £0.00 £57,530.25 £2,417.23 £59,947.48[3]HMRC submit that the failure to pay the NICs was attributable to ‘neglect’ on the Appellant’s part.[4]The Appellant, alternatively, submits that the financial management of the Company had been delegated to a more qualified individual, other than him. HMRC however submit that a director cannot delegate their statutory obligations.[5]Having carefully considered the evidence and the submissions made by both parties, we decided to dismiss this appeal. Our conclusions regarding the key submissions made by the parties are set out below. In this Decision, the legislation and case law are cited so far as relevant to the issues in dispute.

Issues

[6]There is, in truth, one sole issue for determination in this appeal. That is whether the Company’s failure to pay the NICs due was attributable to ‘neglect’ on the part of the Appellant.

Burden and standard of proof

[7]Pursuant to s 121D(4) SSAA 1992, HMRC are required to prove that the Company’s failure to pay NICs was attributable to the Appellant’s neglect.[8]The standard of proof is the ordinary civil standard; that of a balance of probabilities.

Authorities and documents

[9]The authorities to which we were referred by the parties were:(1) Blyth v Birmingham Waterworks Co. (1856) 11 Exch.78 (‘Blyth’);(2) Secretary of State for Trade & Industry v Gray[1995] BCLC 276 (‘Gray’);(3) Re Westmid Packing Services Ltd [1998] 2 All ER 124 (‘Westmid’);(4) Re Barings plc & Ors (No 5), Secretary of State for Trade & Industry v Baker & Ors (No 5) [2000] 1 BCLC 523 (‘Barings & Ors’);(5) O’Rorke v HMRC [2011] UKFTT 839; and(6) HMRC v O’Rorke [2013] UKUT 499 (TC) (‘O’Rorke UT’).[10]The documents to which we were referred included:(i) the Hearing Bundle consisting of 423 pages;(ii) the Authorities Bundle consisting of 316 pages;(iii) the Appellant’s Skeleton Argument dated 18 November 2025; and(iv) HMRC’s Skeleton Argument dated 17 November 2025.

Background facts

[11]During the period 1 November 2020 to 31 August 2021, the Company received a total of £47,280.85 in CJRS Supper Payments, which included sums paid specifically in respect of the NICs due on furloughed employee salaries.[12]During the relevant period, the Company submitted Real Time Information (“RTI”) returns in respect of employee wages, Pay-As-You-Earn (“PAYE”) tax and NICs deductions, declaring the amount due as £94,565.99.[13]In December 2022, the Company entered into creditors’ voluntary liquidation.[14]On 12 September 2023, Officer Dillon opened an enquiry in relation to the Company’s failure to pay the NICs due in the 2019-20, 2020-21 and 2021-22 tax years and, specifically, in respect of the returns submitted for the relevant period. On the same date, in a letter to Hudson Weir (“the Liquidator”), Officer Dillon identified an underpayment of NICs of £101,091.00 in respect of the Company.[15]On 17 October 2023, Officer Dillon received the following information and documents from the Liquidator:(1) A PDF copy of the Company bank statements, covering the period 1 December 2020 to 31 October 2022;(2) An Excel spreadsheet of the bank statements, covering the period 17 March 2020 to 31 October 2022;(3) A copy of correspondence issued to the Company’s former agent requesting various Company records; and(4) A copy of the annual report and unaudited financial statements for the Company, covering the period from 25 February 2020 to 31 December 2020.[16]The Liquidator further stated that they did not have payroll records, a bank mandate, the director’s loan account, or any records detailing transactions with associated companies. The Liquidator further stated that:
“We have not taken any action against the director to date, our investigation has been finalised and due to the lack of assets realised in the liquidation it has been deemed not economical to pursue any further.”
[17]Officer Dillon also identified the following from the information provided:(1) Total receipts for the period 29 March 2020 to 31 October 2022, in the sum of £661,557.50;(2) Company receipts showing Support Payments from HMRC under the CJRS, totalling £47,280.85; and(3) Payments from the Company to its parent company (formerly known as “Airsorted Limited”), totalling £627,809.72, for the period April 2020 to January 2022.[18]On 24 October 2023, Officer Dhillon sent an opening letter and questionnaire to the Appellant to inform him of the enquiry in relation to s 121C SSAA 1992. The letter provided the Appellant with the opportunity to provide any information that he considered relevant to the Company’s failure to pay the NICs due. The opening letter included a PLN factsheet, a copy of the PLN legislation and a questionnaire.[19]On 26 October 2023, Officer Dhillon sent a further email to the Liquidator requesting bank statements for specific periods, and further information in respect of payments identified to the parent company.[20]On 15 November 2023, Officer Dhillon issued an information notice under para. 5A of Schedule 36 to the Finance Act 2008 (“the Information Notice”) to Clydesdale Bank PLC (t/a “Virgin Money”), with a schedule of documents and information to be provided.[21]On 12 December 2023, Officer Dhillon issued a letter to the Liquidator. The letter referred to a sworn statement by the Appellant in the report to creditors (“the Creditors’ Report).[22]On 21 December 2023, Officer Dhillon received an email from Virgin Money in response to the Information Notice issued on 15 November 2023. Virgin Money confirmed the Appellant as the only signatory listed for the Company’s bank account.[23]On 9 January 2024, Officer Dhillon issued a letter to the Appellant, setting out HMRC’s findings.[24]On 9 February 2024, the Appellant sent an email to HMRC requesting extra time to gather data. The Appellant further enquired about the steps that he needed to take in order for Keystone Law (“the previous representatives”) to represent him.[25]On 25 February 2024, Officer Dhillon received representations on behalf of the Appellant from the previous representatives, in response to the letters of 24 October 2023 and 9 January 2024. The letter confirmed that the Appellant was an ‘officer’ of the Company as he was the sole director, and also that there was an underpayment of NICs but that the Appellant denied that the Company’s failure to pay NICs was in any way due to neglect on his part.[26]By a letter dated 23 February 2024, the previous representatives stated that: “Houst Holdings Limited had no initial funding it was entirely dependent upon funding by Houst Limited to pay for the purchase of the assets and its operational expenses. … By this time, all of the trading that Houst Holdings Limited had done in the past was now being carried out by Houst Limited. Houst Holdings Limited in effect simply had expenses including some staff and some property overheads to pay. As it had no income it was entirely reliant on payments made to it by Houst Limited.” [sic][27]On 4 March 2024, HMRC issued the PLN. The PLN was attached to the decision letter representing the underpayment of NICs for the relevant period, together with the statutory interest. The decision letter went on to explain the reasons why the PLN had been restricted to the relevant period when the original enquiry focused on the period 6 March 2020 to 5 November 2021. The decision letter also explained that having reviewed the representations from the previous representatives, HMRC had decided to restrict the application of the legislation at s 121C to the relevant period where they considered the Appellant’s failure to pay to be attributable to a more serious level of neglect. On the same day, the Appellant responded to the PLN in an email stating that HMRC had “got it wrong”, and that he did not know why someone had said that all of the Company’s clients had all been transferred to the parent company.[28]On 6 March 2024, Officer Dhillon replied to the Appellant’s email, and referred him to statements in the Creditors’ Report. Furthermore, the Creditors’ Report showed that the Appellant had signed the document under the title “Statement of Truth”.[29]On 7 March 2024, the Company was dissolved.[30]On 2 April 2024, an appeal and a request for a review were received from Freeths LLP (“the current representatives”) who submitted that the Appellant was aware of the fiduciary duties of a director, but did not accept that he neglected his duties and, therefore, the failure to pay the NICs was not attributable to neglect. The current representatives further submitted that HMRC appeared to conflate delegating tasks to delegating responsibility as the Appellant had delegated the financial management of the Company to a more qualified individual. The current representatives further stated that:
“... the employees of the Company provided services to the whole group... Due to the extent of the Company’s financial difficulties, it would not have been able to pay the tax liabilities as they fell due, no matter which group entity the employees were contracted to.”
[31]On 18 April 2024, Officer Dillon issued his “View of the Matter” letter.[32]On 25 April 2024, HMRC issued a ‘Review Acknowledgment letter’, accepting the Appellant’s request for a review.[33]On 30 April 2024, the Appellant submitted further information to HMRC, including information in respect of the standard for ‘neglect’ in common law. The Appellant requested that the Review Officer consider the representations and arguments made in the letter dated 30 April 2024 against the corresponding arguments and claims made by HMRC.[34]On 23 October 2024, HMRC issued their “Review Conclusion Letter”.[35]On 23 December 2024, the Appellant made an appeal to the First-tier Tribunal. HMRC do not object to the late appeal.

Relevant law

[36]In order to put the parties’ respective contentions into context, we start with the relevant statutory provisions.[37]The relevant law, so far as is material to the issues in this appeal, is as follows:

Social Security Contributions and Benefits Act 1992

[38]Section 6 provides for “liability for Class 1 NICs”, as follows: “6 Liability for Class 1 contributions.(1) Where in any tax week earnings are paid to or for the benefit of an earner over the age of 16 in respect of any one employment of his which is employed earner’s employment— (a) a primary Class 1 contribution shall be payable in accordance with this section and section 8 below if the amount paid exceeds the current primary threshold (or the prescribed equivalent); and (b) a secondary Class 1 contribution shall be payable in accordance with this section and section 9 below if the amount paid exceeds the current secondary threshold (or the prescribed equivalent).(2) No primary or secondary Class 1 contribution shall be payable in respect of earnings if a Class 1B contribution is payable in respect of them.(3) Except as may be prescribed, no primary Class 1 contribution shall be payable in respect of earnings paid to or for the benefit of an employed earner after he attains pensionable age, but without prejudice to any liability to pay secondary Class 1 contributions in respect of any such earnings.(4) The primary and secondary Class 1 contributions referred to in subsection (1) above are payable as follows— (a) the primary contribution shall be the liability of the earner; and (b) the secondary contribution shall be the liability of the secondary contributor; but nothing in this subsection shall prejudice the provisions of paragraphs 3 to 3B of Schedule 1 to this Act.](5) Except as provided by this Act, the primary and secondary Class 1 contributions in respect of earnings paid to or for the benefit of an earner in respect of any one employment of his shall be payable without regard to any other such payment of earnings in respect of any other employment of his.(6) Regulations may provide for reducing primary or secondary Class 1 contributions which are payable in respect of persons to whom Part XI of the Employment Rights Act 1996 (redundancy payments) does not apply by virtue of section 199(2) or 209 of that Act.(7) Regulations under this section shall be made by the Treasury.” (a) a primary Class 1 contribution shall be payable in accordance with this section and section 8 below if the amount paid exceeds the current primary threshold (or the prescribed equivalent); and (b) a secondary Class 1 contribution shall be payable in accordance with this section and section 9 below if the amount paid exceeds the current secondary threshold (or the prescribed equivalent). (a) the primary contribution shall be the liability of the earner; and (b) the secondary contribution shall be the liability of the secondary contributor;

Social Security Administration Act 1992

[39]Section 121C provides for “directors’ liability”, as follows:
“121C Liability of directors etc. for company's contributions (1) This section applies to contributions which a body corporate is liable to pay, where- (a) the body corporate has failed to pay the contributions at or within the time prescribed for the purpose; and (b) the failure appears to the Inland Revenue to be attributable to fraud or neglect on the part of one or more individuals who, at the time of the fraud or neglect, were officers of the body corporate (“culpable officers”). (2) The Inland Revenue may issue and serve on any culpable officer a notice (a “personal liability notice”)- (a) specifying the amount of the contributions to which this section applies (“the specified amount”); (b) requiring the officer to pay to the Inland Revenue— (i) a specified sum in respect of that amount; and (ii) specified interest on that sum; and (c) where that sum is given by paragraph (b) of subsection (3) below, specifying the proportion applied by the Inland Revenue for the purposes of that paragraph. (3) The sum specified in the personal liability notice under subsection (2)(b)(i) above shall be— (a) in a case where there is, in the opinion of the Inland Revenue, no other culpable officer, the whole of the specified amount; and (b) in any other case, such proportion of the specified amount as, in the opinion of the Inland Revenue, the officer's culpability for the failure to pay that amount bears to that of all the culpable officers taken together. (4) In assessing an officer's culpability for the purposes of subsection (3)(b) above, the Inland Revenue may have regard both to the gravity of the officer's fraud or neglect and to the consequences of it. (5) The interest specified in the personal liability notice under subsection (2)(b)(ii) above shall be at the Class 1 rate on the Class 1 element of the specified sum, and otherwise at the prescribed rate, and shall run from the date on which the notice is issued. (6) An officer who is served with a personal liability notice shall be liable to pay to the Inland Revenue the sum and the interest specified in the notice under subsection (2) (b) above. … (9) In this section — “the Class 1 rate”— (a) in subsection (5) means the rate from time to time applicable under section 103(1) of the Finance Act 2009; and (b) in subsection (7)(c) means the rate from time to time applicable under section 103(2) of that Act;] “the Class 1 element”, in relation to any amount, means so much of that amount as is calculated by— (a) multiplying that amount by so much of the specified amount as consists of Class 1 contributions; and (b) dividing the product of that multiplication by the specified amount; “contributions” includes any interest or penalty in respect of contributions (and accordingly, in the definition of “the Class 1 element” given by this subsection, “Class 1 contributions” includes any interest or penalty in respect of Class 1 contributions); “officer”, in relation to a body corporate, means- (a) any director, manager, secretary or other similar officer of the body corporate, or any person purporting to act as such; and (b) in a case where the affairs of the body corporate are managed by its members, any member of the body corporate exercising functions of management with respect to it or purporting to do so; “the prescribed rate” means the rate from time to time prescribed by regulations under section 178 of the Finance Act 1989 for the purposes of the corresponding provision of Schedule 1 to the Contributions and Benefits Act, that is to say- (a) in relation to subsection (5) above, paragraph 6(2)(a); (b) in relation to subsection (7) above, paragraph 6(2)(b).” (a) the body corporate has failed to pay the contributions at or within the time prescribed for the purpose; and (b) the failure appears to the Inland Revenue to be attributable to fraud or neglect on the part of one or more individuals who, at the time of the fraud or neglect, were officers of the body corporate (“culpable officers”). (a) specifying the amount of the contributions to which this section applies (“the specified amount”); (b) requiring the officer to pay to the Inland Revenue— (i) a specified sum in respect of that amount; and (ii) specified interest on that sum; and (c) where that sum is given by paragraph (b) of subsection (3) below, specifying the proportion applied by the Inland Revenue for the purposes of that paragraph. (a) in a case where there is, in the opinion of the Inland Revenue, no other culpable officer, the whole of the specified amount; and (b) in any other case, such proportion of the specified amount as, in the opinion of the Inland Revenue, the officer's culpability for the failure to pay that amount bears to that of all the culpable officers taken together.

(b) ”

[40]For the purposes of s 121C, “officers” includes not only the statutory officers of the company (namely the directors and company secretary (if there is one), but also “managers” and “similar officers”. The provision has to be construed ejusdem generis, and therefore the meaning of ‘manager’ or ‘similar officer’ has to be taken in context.[41]Section 121D deals with “appeals”, as follows: “121D Appeals in relation to personal liability notices(1) No appeal shall lie in relation to a personal liability notice except as provided by this section.(2) An individual who is served with a personal liability notice may appeal ... against the Inland Revenue's decision as to the issue and content of the notice on the ground that— (a) the whole or part of the amount specified under subsection (2)(a) of section 121C above (or the amount so specified as reduced under subsection (7) of that section) does not represent contributions to which that section applies; (b) the failure to pay that amount was not attributable to any fraud or neglect on the part of the individual in question; (c) the individual was not an officer of the body corporate at the time of the alleged fraud or neglect; or (d) the opinion formed by the Inland Revenue under subsection (3)(a) or (b) of that section was unreasonable.(3) The Inland Revenue shall give a copy of any notice of an appeal under this section, within 28 days of the giving of the notice, to each other individual who has been served with a personal liability notice.(4) On an appeal under this section, the burden of proof as to any matter raised by a ground of appeal shall be on the Inland Revenue.(5) Where an appeal under this section— (a) is brought on the basis of evidence not considered by the Inland Revenue, or on the ground mentioned in subsection (2)(d) above; and (b) is not allowed on some other basis or ground, and is notified to the tribunal, the tribunal shall either dismiss the appeal or remit the case to the Inland Revenue, with any recommendations the tribunal sees fit to make, for the Inland Revenue to consider whether to vary their] decision as to the issue and content of the personal liability notice.(6) In this section— “officer”, in relation to a body corporate, has the same meaning as in section 121C above; “personal liability notice” has the meaning given by subsection (2) of that section; “tribunal” means the First-tier Tribunal or, where determined under Tribunal Procedure Rules, the Upper Tribunal; “vary” means vary under regulations made under section 10 of the Social Security Contributions (Transfer of Functions, etc.) Act 1999.” (a) the whole or part of the amount specified under subsection (2)(a) of section 121C above (or the amount so specified as reduced under subsection (7) of that section) does not represent contributions to which that section applies; (b) the failure to pay that amount was not attributable to any fraud or neglect on the part of the individual in question; (c) the individual was not an officer of the body corporate at the time of the alleged fraud or neglect; or (d) the opinion formed by the Inland Revenue under subsection (3)(a) or (b) of that section was unreasonable. (a) is brought on the basis of evidence not considered by the Inland Revenue, or on the ground mentioned in subsection (2)(d) above; and (b) is not allowed on some other basis or ground,

Social Security (Contributions Regulations) 2001

[42]Regulation 67 provides that:
“Collection and recovery of earnings-related contributions, and Class 1B contributions 67. —(1) Subject to the provisions of regulations 68 and 70, earnings-related contributions and Class 1B contributions shall be paid, accounted for and recovered in like manner as income tax deducted from the PAYE income by virtue of regulations under section 684 of ITEPA 2003 (PAYE Regulations). (1A) PAYE income has the meaning given in section 683 of ITEPA 2003. (2) ...The provisions contained in Schedule 4, (which contains provisions derived from the PAYE Regulations with extensions and modifications) shall apply to and for the purposes of earnings-related contributions and Class 1B contributions. (3) Schedules 4A (real time returns) and 4B (additional information about payments) apply to and for the purposes of earnings-related contributions.”

Income Tax Pay As You Earn Regulations 2003 SI 2003/2682

[43]Regulation 69 of the PAYE Regulations provides that: “Due date and receipts for payment of tax 69. —(1) An employer must pay amounts due under regulation 67G(2), as adjusted by regulation 67H(2) where appropriate,or68(2)—(a) within 17 days after the end of the tax period, where payment is made by an approved method of electronic communications, or(b) within 14 days after the end of the tax period, in any other case. (1A) In paragraph (1), the reference to amounts due under regulation 67G(2) includes any amount the employer was liable to deduct from employees during the tax period whether or not that amount was included in any return under regulation 67B (real time returns of information about relevant payments) or 67D (exceptions to regulation 67B). (2) The Inland Revenue must give a receipt to the employer for the total amount paid under regulation 67G(2), as adjusted by regulation 67H(2) where appropriate,or68(2) if asked. (3) But no separate receipt for tax only need be given if a receipt is given for the total amount of tax and any earnings-related contributions (as defined by regulation 1(2) of the SSC Regulations paid at the same time. (4) In paragraph (1) “the tax period”, in relation to an amount of retrospective employment income, means the tax period immediately following the relevant time.” (a) within 17 days after the end of the tax period, where payment is made by an approved method of electronic communications, or (b) within 14 days after the end of the tax period, in any other case.[44]Section 8 of the Social Security Contributions (Transfer of Functions, etc) Act 1999 provides the authority for HMRC to issue a PLN, as follows:
“8 Decisions by officers of Board. (1) Subject to the provisions of this Part, it shall be for an officer of the Board— … (h) to decide any question as to the issue and content of a notice under subsection (2) of section 121C of the Social Security Administration Act 1992 (liability of directors etc. for company’s contributions), … (e) to decide whether contributions of a particular class have been paid in respect of any period…”

The evidence and the key submissions

[45]The documents for the hearing, set out at [10] above comprised pleadings, correspondence relating to HMRC’s enquiry and appeal correspondence.[46]In his oral evidence, Officer Dillon’s stated that the decision issue the Appellant with a PLN was based on the following:(1) For the period 1 November 2020 to 31 August 2021, the Company made claims to HMRC for Support Payments under the CJRS. As a result of these claims, HMRC made payments totalling £47,280.85 to the Company. These CJRS payments included an amount specifically in respect of NIC (and PAYE tax) for furloughed employees. Despite this, the Company failed to pay over even the NIC (or PAYE tax) element of the CJRS to HMRC and, instead, used these monies for other purposes.(2) Analysis of the Company bank statements had identified total receipts of £661,577.50 during the period March 2020 to 31 October 2022. These receipts included the CJRS Support Payments. Despite this, none of the company receipts were applied towards meeting the Company’s statutory NIC obligations.Analysis of the Company’s bank statements also showed that the Company made payments to the parent company totalling £627,809.72 during the period 29 April 2020 to 27 January 2022. These payments were made at a time when the Company was failing to pay any of the NIC (or PAYE tax) due to HMRC.(3) The net NICs declared as being due in the RTI returns submitted by the Company to HMRC for the relevant period were £57,530.25. Total payments of NICs made by the Company in respect of the NICs declared as being due in the returns was, however, nil. The notice of liability for the Appellant stated the amount due as £59,947.48 (unpaid NICs of £57,530.25 plus statutory interest on the unpaid NICs to the date of liquidation of £2,417.23).(4) The Appellant was the only formally appointed director of the Company at Companies House throughout the relevant period, thus qualifying the Appellant as an ‘officer’ of the Company for the purposes of s 121C SSAA 1992. No other individual had been identified as acting as a ‘officer’ of the Company during the relevant period.The Appellant was also the sole signatory to the Company bank account. As a formally appointed director of the Company, the Appellant had a statutory obligation to pay over the NICs due to HMRC each month. This statutory obligation existed irrespective of any financial difficulties that the Company may have been facing, and was not dependent on the availability of cash.(5) The Appellant signed the “Statement of Affairs” and “Statement of Truth” in his capacity as director. The Appellant was aware of his statutory obligations as a director in respect of NICs. Despite this, the Appellant failed to make any payments in respect of the Company’s NIC liabilities and caused the Company liabilities to increase each month, until the last return in October 2021.The Appellant made no payments of NICs in the relevant period despite having several dealings with HMRC’S Debt Management Office regarding the Company’s liabilities.[47]We considered the evidence to be of assistance to us in understanding the background and details regarding the decision to issue the PLN.[48]Mr Lucas’ submissions can be summarised as follows:(1) It is not in dispute that the Company failed to pay NICs for the relevant period. The NICs due have been taken from the Company RTI returns. The Company failed to pay NICs to HMRC despite the fact that for the period 1 November 2020 to 31 August 2021, the Company was in receipt of CJRS Support Payments that specifically included amounts in respect of NICs and PAYE tax.(2) The information available demonstrates that the Appellant sought to fund his business through non-payment of tax. The obligation to pay amounts due to HMRC in respect of NICs (and PAYE tax) is an absolute one. A prudent and reasonable person acting as a director of a company would comply with their statutory duty to ensure that tax is paid.(3) The Appellant was an officer of the Company, as defined in s 121C (9)(a) SSAA 1992, during the relevant period. The Company’s failure to pay NICs due was attributable to ‘neglect’ on the part of the Appellant and, as such, he is a ‘culpable officer’ for the purposes of the s 121C (1)(b) SSAA 1992. By withholding payment of NICs and using the unpaid NIC (and PAYE Tax) to boost cashflow and fund the business, the Appellant was acting in breach of his statutory obligations as a director. A lack of funds does not excuse a director from meeting their statutory obligations.(4) It is well established in law that a director cannot delegate their statutory obligations and responsibilities to someone else, including in respect of NICs and PAYE tax. The Appellant has not argued that the individual to whom certain financial functions were delegated was acting as an ‘officer’ of the Company during the relevant period, and there is nothing to suggest that this individual owed the same statutory obligations with regard to NIC as the Appellant (as a formally appointed director).[49]Mr Hackett’s submissions can be summarised as follows:(1) The burden of proof is on HMRC, and there is no evidence to support HMRC’s argument that the Company supported itself by failing to pay tax. There were insufficient funds to pay tax in this appeal. The Company and the Appellant were diligent in reducing financial burdens and improving the financial health of the Company. The Appellant was the director of a genuinely failed Company. The Appellant does not argue that he is absolved from paying NICs, but the question is whether a reasonable person would have taken the same steps that the Appellant took.(2) HMRC accepted that the COVID-pandemic had a significant impact on many businesses. HMRC’s suggestion that the failure to pay was attributable to neglect on the part of the Appellant is tantamount to suggesting that a reasonable man would have been unaffected by the circumstances caused by the pandemic. Such an argument is not sustainable.(3) The Appellant was the victim of extraordinary economic and social circumstances, which severely impacted the Company’s ability to trade and, ultimately, led to the Company’s liquidation.(4) It is wrong for HMRC to submit that employees were retained within the Company for the purposes of avoiding NIC liabilities.[50]At the conclusion of the hearing, we reserved our decision, which we now give with reasons. We have considered any key points of disagreement in reaching our conclusions below.

Findings of fact

[51]The following facts were either accepted, admitted or proved:(1) For the period 1 November 2020 to 31 August 2021, the Company made claims to HMRC for Support Payments under the CJRS. As a result of these claims, HMRC made payments totalling £47,280.85 to the Company. These CJRS payments included an amount in respect of NIC (and PAYE tax) for furloughed employees. Despite this, the Company failed to pay over the NIC (or PAYE tax) element of the CJRS to HMRC and, instead, used the money for other purposes.(2) For the relevant period, the Company RTI returns in respect of employee wages, PAYE tax and NICs deductions, declared the amount due as £94,565.99. During the period 1 November 2020 to 31 August 2021, the Company received a total of £47,280.85 in CJRS payments, which included sums paid specifically in respect of the NICs due on furloughed employee salaries. The net NICs declared as being due in the RTI returns submitted by the Company to HMRC for the period August 2020 to October 2021 were £57,530.25. However, total payments of NICs made by the Company in respect of the NICs declared as being due in the RTI returns was ‘nil’.(3) The Company bank statements had identified total receipts of £661,577.50 during the period March 2020 to 31 October 2022. These receipts included the CJRS Support Payments. Despite this, none of the Company receipts were applied towards meeting the company’s statutory NIC obligations.Analysis of the Company’s bank statements showed that the Company made payments to the parent company, totalling £627,809.72, during the period 29 April 2020 to 27 January 2022. These payments were made at a time when the Company was failing to pay any of the NIC (or PAYE tax) due to HMRC.(4) On 12 September 2023, in a letter to the Liquidator, Officer Dillon identified an underpayment of NICs of £101,091.00 in respect of the Company. Officer Dillon identified total receipts for the period 29 March 2020 to 31 October 2022, of £661,557.50, from the information provided. The Company receipts included Support Payments from HMRC, under the CJRS, totalling £47,280.85. There was also evidence of payments to the parent company, totalling £627,809.72, for the period April 2020.(5) On 21 December 2023, Virgin Money confirmed the Appellant as the only signatory listed for the Company’s bank account.(6) On 25 February 2024, HMRC received representations from the Appellant’s previous representatives. The letter confirmed that the Appellant was an officer of the Company as he was the sole director, and also that there was an underpayment of NICs.(7) The Creditors’ Report stated at para. 4.1 that: “this narrative has been provided by the Director and has not been verified”(8) A sworn statement by the Appellant in the Creditors’ Report stated that: “Over the period of March to July 2020, all clients acquired from Hostmaker were transferred from Houst Holdings Limited to the parent company, Houst Limited. By October 2021, all employees acquired from Hostmaker were transferred to Houst Limited or had left the Company.”(9) The Appellant had signed the document under the heading “Statement of Truth”.(10) The Appellant was the only director of the Company at Companies House throughout the relevant period, thus qualifying the Appellant as an ‘officer’ of the Company for the purposes of s 121C SSAA 1992. No other individual has been identified as acting as a ‘officer’ of the Company during the relevant period.[52]We, therefore, make these findings of fact

Discussion

[53]The Appellant appeals against a PLN issued to him by HMRC following the failure by the Company to pay NICs due during the relevant period. The legislation requires an employer to pay over any contributions due on employee’s earnings. Payment is due on the 19th of each month (or the 22nd if paid electronically). If the correct amounts of contributions are not paid over, s 121C empowers HMRC to seek to recover, from ‘officers’ of the company, any unpaid contributions, plus interest, provided that certain conditions are met, as follows:(1) There must have been an underpayment of the NICs due;(2) It must appear to HMRC that the company’s failure to pay the NICs due was attributable to ‘fraud’ or ‘neglect’ on the part of one or more individuals; and(3) The individual in question must have been acting as an ‘officer’ of the company at the time of the failure to pay.[54]Section 121C (9)(a) SSAA 1992 defines an ‘officer’ of a company, for the purposes of the legislation, as:
“any director, manager, secretary or other similar officer of the body corporate, or any person purporting to act as such”
[55]Section 8 of the Social Security Contributions (Transfer of Functions, etc) Act 1999 provides the authority for HMRC to issue a PLN. Essentially, HMRC are able to “pierce the corporate veil” to make individuals personally liable for the tax debts of companies.[56]Section 121D SSAA 1992 specifies the grounds on which a PLN may be appealed, as follows:(1) The amount claimed, or part of it, is not the proper subject of a PLN;(2) The failure to pay was not attributable to any ‘fraud’ or ‘neglect’ by the individual in question;(3) The individual was not an ‘officer’ of the Company at the time; and(4) HMRC’s opinion as to the level of culpability attached to the individual in question was ‘unreasonable’.[57]It is not disputed that there was an underpayment of Class 1 and Class 1A NICs by the Company, and it is further not disputed that the Appellant was an officer of the Company. These matters are not in issue between the parties. Furthermore, the Appellant has not appealed against the amount of NICs specified in the PLN. The only area of dispute that we are required to determine relates to whether HMRC have proved, on the balance of probabilities, that the Company’s failure to pay contributions was due to neglect on the part of the Appellant.[58]The legislation does not define the term ‘neglect,’ so the word takes on its ordinary everyday meaning. We have considered the relevant authorities.The tribunal has taken the view that negligence (and neglect) in the context of tax statutes means to act in an imprudent or unreasonable manner.[59]The case of Blythconsidered what ‘neglect’ is (at 786) (per Alderson B), as follows:
“Negligence is the omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs, would do, or doing something which a prudent and reasonable man would not do. The defendants might be liable for negligence, if, unintentionally, they omitted to do that which a reasonable person would have done or did that which a person taking reasonable precautions would not have done.”
[60]In other words, there is an objective test to be applied, comparing the actions of the particular individual with the actions that would be taken by a “reasonable and prudent” individual in similar circumstances. Thus, an individual would be negligent even if they acted innocently, but their actions fell short of those of a reasonable and prudent person. It is an ‘objective’ standard of conduct rather than a ‘subjective’ state of mind.[61]In O’Rorke UT, at [69], the Upper Tribunal, similarly, held that an objective test is to be applied when establishing ‘neglect’ under s 121C SSAA 1992, as follows:
“In short, in my judgement, in section 121C the word neglect is to be given its usual meaning; it is a standard of conduct, not a subjective state of mind. I do not consider that there is anything sufficient in the context which the word appears to mandate a meaning which is not its ordinary meaning.”
[62]Turning to the circumstances of this appeal, Mr Hackett submits that the Appellant was not negligent but had delegated the financial management of the Company to a more qualified individual. We find that such a submission is wholly without merit. This is because, as a director of the Company, the Appellant would have been required to be involved in the financial and tax affairs of the Company. In this respect, Chapter 2, Part 10 of the Companies Act 2006 - particularly ss 171 to 177 - deals with directors’ duties. The general duties are based on certain common law rules and equitable principles as they apply in relation to directors, and have effect in place of those rules and principles as regards the duties owed to a company by a director. The duties include, inter alia, fiduciary duties. A director is expected to be familiar with any records sent or received in relation to the company’s financial obligations. Reliance on another does not affect a director’sknowledge as to the making of the various corporate tax returns; crucially, the indebtedness of a company to HMRC in respect of PAYE and NICs. It is insufficient for a director to remain unaware of whether the Company was complying with its statutory duties.[63]We further reject the submission that HMRC are conflating delegating tasks with delegating responsibility (even if the Appellant had delegated the financial management of the Company to a more qualified individual). In Barings & Ors,

Judge Jonathan Parker materially said this:

“Whilst directors are entitled (subject to the articles of association of the company) to delegate particular functions to those below them in the management chain, and to trust their competence and integrity to a reasonable extent, the exercise of the power of delegation did not absolve a director from the duty to supervise the discharge of the delegated functions.”
[64]In Gray, the court referred, with approval, to a statement made by Sir Richard Scott when disqualifying a director:
“Overall responsibility is not delegable. All that is delegable is the discharge of a particular function.”
[65]Similarly, in Westmid, at 131, the court held, inter alia, that:
“It is of the greatest importance that any individual who undertakes the statutory and fiduciary obligations of being a company director should realise that these are inescapable personal responsibilities.”
[66]Thus, the fact that the Appellant may have delegated the day-to-day operation of certain financial functions to another does not lessen his responsibility as a director. Directors are required to supervise the operation of the accounting functions, and ensure that they are properly undertaken. As the Appellant was the sole director of the Company, it is his actions, intentions and awareness that fall to be ascribed to the Company. The Appellant, as director, was the guiding mind of the Company. He is to be taken to intend the legal consequences of his actions.[67]Materially, in this appeal, the Company was in receipt of CJRS Support Payments. The CJRS was introduced at the start of the COVID-pandemic to provide funding for employers who furloughed their employees; rather than making them redundant when businesses were, effectively, forced to shut down as a result of the lockdown announced in March 2020. The Coronavirus Act 2020 Functions of HM Revenue & Customs (CJRS) Direction (“the Treasury Direction”), dated 15 April 2020, was introduced to govern HMRC’s administration of the CJRS. The main body of the Treasury Direction, provides that:
“1. This direction applies to Her Majesty’s Revenue and Customs. 2. This direction requires Her Majesty’s Revenue and Customs to be responsible for the payment and management of amounts to be paid under the scheme set out in the Schedule to this direction (the Coronavirus Job Retention Scheme). 3. This direction has effect for the duration of the scheme.”
[68]The purpose of the CJRS is set out at para. 2 of the Treasury Direction, which provides that:
“2.1 The purpose of the CJRS is to provide for payments to be made to employers on a claim made in respect of them incurring costs of employment in respect of furloughed employees arising from the health, social and economic emergency in the United Kingdom resulting from coronavirus and coronavirus disease.”
[69]The amounts paid to an employer pursuant to a claim under the CJRS were made by way of reimbursement of the expenditure incurred, or to be incurred, by the employer in respect of the employee to which the claim relates. We have found that HMRC made Support Payments totalling £47,280.85 to the Company. These payments included an amount in respect of NIC and PAYE tax for furloughed employees. The incontrovertible fact in this appeal is that the Appellant failed to pay over the NICs due to HMRC in clear breach of his statutory obligations, and the rules governing the CJRS.[70]The information considered by HMRC showed that during the relevant period, payments totalling £627,809 were made from the Appellant’s bank account to the parent company. These payments were made at a time that no NIC (or PAYE tax) was being paid to HMRC. The Appellant submits that the majority of the funds paid into the Company’s bank account belonged to clients and, as such, were held in Trust for customers of the parent company so could not be used for any other purpose. No evidence has, however, been provided to support a finding that the £627,809 paid to the parent company represented client funds that could not be used for any other purpose.[71]Whilst there may have been a transfer of undertakings during the relevant period (or part of it), the Appellant does not explain why the parent company did not make payments to the Company to allow it to meet its statutory obligations in respect of tax. There appear to have been a number of cashflow issues in the circumstances of this appeal. This point is, however, academic in light of our findings above. Indeed, in O’Rorke FTT,

Judge Brown KC considered the availability of cash to pay HMRC and said this:

“Payment of PAYE and NICs is a statutory obligation and is not dependant on availability of cash.”
[72]Mr Hackett further submits that the Appellant had competing duties to his employees, and to HMRC. We are not in agreement with this submission either. Contrary to Mr Hackett’s submissions, there is a public interest in the timely payment of taxes. This is because, as stated earlier, there is a statutory duty to comply with tax.[73]The collection and management powers of HMRC are found at s 1 of the Taxes Management Act 1970 (“TMA”) and s 5 of the Commissioners of Revenue & Customs Act 2005 (“CRCA”). The scope of those powers was described by Lord Hoffman in R v HMRC ex parte Wilkinson [2005] UKHL 30, at [20] to [21], as follows:
“[20] Section 1 of TMA gives them what Lord Diplock described in R v Inland Revenue Commissioners, Ex p National Federation of Self-Employed and Small Businesses Ltd [1982] AC 617, 636, as ‘a wide managerial discretion as to the best means of obtaining for the national exchequer from the taxes committed to their charge, ...”
[74]In R (on the application of Davies & Anor) v R & C Comrs [2011] STC 2249, the Supreme Court considered the discretion in HMRC’s duty of management. Lord Wilson said this, at [26]:
“The primary duty of the Revenue is to collect taxes which are properly payable in accordance with current legislation but it is also responsible for managing the tax system: ... Inherent in the duty of the management is a wide discretion. Although the discretion is bounded by the primary duty (see R (on the application of Wilkinson) v IRC [2005] UKHL 30 at [21], [2006] STC 270 at [21], [2005] I WLR 1718 per Lord Hoffman…”
[75]The legislation, therefore, makes provision for the actions of HMRC in respect of the collection of taxes and management of the system relating to the collection of taxes.[76]For all of the foregoing reasons, the appeal is dismissed. These findings are not to suggest that the Appellant sought to deliberately evade tax, but are a balanced appraisal of all of the information before us, in light of the relevant law.

Right to apply for permission to appeal

[77]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 27 March 2026