Director personally liable for insolvent company’s outstanding NICs

The First-tier Tribunal’s decision in Jenkins‑Yates [2026] UKFTT 480 (TC) clearly explains when HMRC can make a company director personally responsible for unpaid tax by imposing a personal liability notice (PLN) after a company becomes insolvent. It shows that directors cannot always escape liability for company debts, and accountants and insolvency practitioners should make this clear to directors when a business is in financial trouble.

Although the tribunal’s decision didn’t develop new law, it applied long-established principles to a modern case involving sole directorship, group arrangements, cashflow pressure and Coronavirus Job Retention Scheme (CJRS) funding.

The case also offers a useful illustration of how tribunals approach the concept of “neglect” under section 121C of the Social Security Administration Act 1992 (SSAA 1992). It also highlights the evidence likely to influence HMRC when deciding whether to pursue personal liability.

Facts of the case

James Jenkins‑Yates acted as the sole director of Houst Holdings Limited. The company entered creditors’ voluntary liquidation in December 2022.

Between November 2020 to August 2021, the company submitted RTI returns declaring PAYE and NIC liabilities of nearly £95,000, but made no payments of NICs.

During the same period, the company received approximately £47,000 in CJRS payments, including amounts intended to cover employer NICs.

The company received payments totalling more than £660,000 (including CJRS payments), most of which it transferred to its parent company. The director didn’t provide evidence to explain why the company made substantial payments within the group while leaving its statutory NIC liabilities unpaid.

In March 2024, HMRC issued a PLN for just under £60,000. This covered unpaid NICs and interest for a restricted period during which HMRC considered the director’s conduct to be particularly serious. The director appealed. He argued that he had delegated financial management to a more qualified individual and that the pandemic had severely constrained the company’s ability to pay.

The statutory framework

Section 121C SSAA 1992 allows HMRC to recover unpaid NICs directly from company officers in limited circumstances.

If a company fails to pay NICs on time, and HMRC considers that failure is due to fraud or neglect by one or more company officers, it can issue a PLN. This requires the officer to pay some or all of the unpaid contributions, plus interest.

The legislation includes important safeguards. HMRC bears the burden of proof on appeal of the PLN, and the tribunal must decide the matter on the balance of probabilities.

The definition of “officer” in relation to the company extends beyond directors to include others exercising managerial control. In practice, HMRC most commonly targets directors, particularly where they act as sole or main decision‑makers.

The central issue: neglect

The tribunal identified a single issue for determination: whether the company’s failure to pay NICs was attributable to neglect on the part of the director. HMRC didn’t allege fraud.

As the legislation doesn’t define “neglect”, the tribunal applied established authority from other cases. It confirmed that neglect involves an objective standard of conduct.

The tribunal didn’t consider the director’s intentions or subjective beliefs. Instead, it asked whether a reasonable and prudent director in the same situation would have acted differently.

This approach is important for directors and advisers to understand. Even if a director is acting honestly under a lot of pressure, a tribunal may still find neglect if the director knowingly allows legal duties to be ignored.

Delegation and directors’ responsibilities

The director argued that he had delegated financial management to another individual. The tribunal rejected this argument without hesitation.

While company law allows directors to delegate functions, it doesn’t allow them to delegate responsibility. Relying on established authority, including Barings & Ors and Secretary of State v Gray, the tribunal confirmed that directors must supervise delegated tasks and remain sufficiently informed about the company’s financial and tax position.

The tribunal highlighted a statement made by Sir Richard Scott when disqualifying a director in Secretary of State v Gray:

"Overall responsibility is not delegable. All that is delegable is the discharge of a particular function."

In the present case, the director acted as the sole signatory on the company’s bank account and signed statutory and insolvency documents confirming his knowledge of the company’s affairs.

Against this background, the tribunal treated his failure to make sure NICs were paid - or even to notice that no payments had been made - as clear evidence of neglect.

Cashflow pressure and statutory obligations

The tribunal accepted that the COVID‑19 pandemic created exceptional trading conditions for many businesses. However, it rejected the suggestion that cashflow pressure excused the non‑payment of NICs.

The tribunal restated a fundamental principle: ‘Payment of PAYE and NICs is a statutory obligation and isn’t dependant on availability of cash.’ (O’Rorke FTT).

A director who chooses to prioritise other payments - such as suppliers, employees, group companies or ongoing trading - over HMRC doesn’t avoid a finding of neglect.

This reinforces the message that directors who treat HMRC as a source of working capital risk personal exposure in the event of insolvency.

The significance of CJRS funding

The tribunal placed weight on the company’s receipt of CJRS payments. HMRC paid these sums to reimburse employers for employment costs, including employer NICs.

Despite receiving CJRS funding that expressly covered NICs, the company paid nothing to HMRC.

Although the tribunal didn’t characterise this conduct as deliberate misuse, it treated the failure to apply CJRS funds as intended as a strong indicator of neglect.

The tribunal regarded the CJRS payments as evidence that the company had access to funds that should have flowed directly to HMRC.

Evidential features of HMRC’s case

The decision highlights several factors that HMRC and tribunals are likely to treat as significant when assessing PLNs:

• A sole director exercising full control over company finances.
• Sustained non‑payment of NICs rather than a short‑term failure.
• RTI submissions acknowledging liabilities without corresponding payment.
• Availability of funds for other purposes, including intra‑group transfers.
• Receipt of CJRS or similar funding that includes tax elements.

No single factor determined the outcome. Taken together, however, they supported HMRC’s conclusion that the director’s conduct fell below the standard expected of a reasonable and prudent director.

Practical implications for advisers

For accountants and insolvency practitioners who are often at the forefront of advising directors when a company is facing financial difficulties, the decision reinforces the need to give clear, documented advice about the personal risks associated with non‑payment of PAYE and NICs. Where companies face acute cashflow pressure, advisers should ensure that directors understand that continued trading funded by unpaid employment taxes may expose them to personal liability, even where directors act honestly but under exceptional pressure.

Conclusion

The tribunal’s decision in Jenkins‑Yates applies established principles with clarity. It confirms that neglect under section 121C SSAA 1992 depends on objective conduct, not subjective intention. It also confirms that delegation has limits and that directors cannot subordinate statutory tax obligations to commercial priorities.