In November 2025, the government announced a joint strategy involving HMRC, the Insolvency Service, and Companies House to crack down on what it has termed "contrived insolvencies." The stated aim is to double the amount of tax protected through enforcement from £125m to £250m. HMRC's Transformation Roadmap, published in July 2025, set out plans to increase the use of upfront security deposit demands, make more directors personally liable for company debts, and boost enforcement sanctions across the board.
HMRC has been building towards this position for several years, and the tools to act are already in place. The question for directors, and for the insolvency practitioners advising them, is whether they fully understand what those tools can do.
The legal foundation
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 does this is the Joint Liability Notice (JLN).
A JLN makes individuals jointly and severally liable for amounts the company owes to HMRC, including the tax itself, any interest, and any penalties. Once issued and unchallenged, a valid notice is enforceable in the same way as any personal debt, through the courts, and against your home, your savings, and your assets.
These powers have existed since July 2020.
What has changed is HMRC's stated commitment to using them far more aggressively, with the active involvement of the Insolvency Service and Companies House adding a further layer of cross-agency scrutiny that was not previously in place.
When can HMRC issue a JLN?
JLNs can be issued either after a company becomes insolvent or, in certain circumstances, before insolvency has occurred, where HMRC believes there is a serious possibility that insolvency will arise, and tax debts will remain unpaid.
The legislation targets three broad categories of conduct:
- Tax avoidance arrangements
- Tax evasion
- Repeated insolvency and non-payment, where a director has a pattern of closing companies with unpaid tax liabilities and then continuing to trade through a successor business
For most directors in genuine financial difficulty, the third category is the most important. HMRC may issue a JLN where more than two companies connected to the same individual have entered an insolvency process within a five-year period, significant tax liabilities remain unpaid, and the individual has continued to trade in a substantially similar business.
It is worth being clear that "insolvency" in this context is not limited to liquidation. It also includes administration, which broadens the scope considerably.
The reach goes beyond directors
A JLN is not limited to named directors. HMRC has the power to issue notices to shadow directors, shareholders, and LLP members where those individuals were sufficiently involved in the management or conduct of the company. HMRC does not have to apportion the debt between those named; it can pursue any one individual for the full amount.
This is a point that catches people out. Someone who has never held a formal directorship but has been actively involved in running the business can still find themselves personally on the hook for the company's tax liabilities.
The two-year clock
A JLN must be given within two years of HMRC becoming aware that all the statutory conditions have been met. Once issued, the consequences extend further than the existing debt. The individual is made jointly and severally liable for any unpaid tax liability of the new company, as well as any tax liability the new company incurs for five years following the date the JLN was given. If unpaid liability also remains from one or both of the previous companies, the individual is liable for that too.
The grey area that deserves attention
One of the most complex aspects of this legislation is how HMRC treats simultaneous liquidations. Where a director closes two or more connected companies at the same time, perhaps because a single economic event has brought them all down together, many would regard that as one insolvency event rather than a "pattern" of repeated insolvency. HMRC does not always see it that way. Where unpaid tax liabilities remain and trading continues in some form, HMRC has demonstrated a willingness to investigate, regardless of the commercial logic behind the simultaneous closures.
This is a developing area. There is limited tribunal case law on the interpretation of Schedule 13, which means that where HMRC issues a JLN and the director disputes it, the arguments can be complex and the outcome far from predictable. What is clear is that HMRC's increasing appetite for enforcement makes it more likely that these edge cases will be tested, not less.
What directors should be thinking about
If you are a director who has overseen more than one company failure in the past five years, has HMRC liabilities outstanding from any of those companies, and is currently trading or intending to trade in a new or similar business, the question of personal liability under Schedule 13 should be part of your planning, not an afterthought.
It remains within HMRC's discretion whether to issue a notice, and one of the factors it will consider is the individual's financial position and whether pursuing them would actually result in recovery. However, with a government-backed enforcement strategy now in place and cross-agency information sharing between HMRC, the Insolvency Service, and Companies House, the days of slipping through the net are becoming fewer.
What insolvency practitioners should be doing
As insolvency practitioners, we have a responsibility to ensure that directors understand the potential personal exposure they face under Schedule 13 before any formal process begins, not after. Where a client has multiple companies in difficulty, where HMRC features as a significant creditor, and where the director intends to continue trading in any form, specialist tax advice alongside the insolvency advice is not optional.
The personal consequences of a JLN, including the risk to a director's home and savings, are serious enough that early, specialist advice is the only sensible course.
If your business is facing financial difficulty, or you are concerned about what a previous or current insolvency might mean for you personally, please do get in touch with the team at Even Keel Solutions. We can talk through your position and make sure you have the right advice around you.
This blog is intended for general information purposes and does not constitute legal advice. Specific advice should always be sought for individual circumstances.
Sources
- Schedule 13, Finance Act 2020 (legislation.gov.uk)
- HMRC Guidance: Overview of joint and several liability notices for tax avoidance, tax evasion and repeated insolvency (gov.uk)
- Begbies Traynor: Joint and Several Liability Notices: Directors of insolvent companies face greater personal exposure to tax liabilities (begbies-traynorgroup.com)
- Tax Disputes: Schedule 13 Finance Act 2020: Comprehensive Guide to HMRC Joint Liability Notices (taxdisputes.co.uk)
- Independent Tax: Joint and Several Liability Notices (independent-tax.co.uk)
- Dyne Solicitors: Joint and Several Liability Notices: What do Directors and LLP Members need to know (dynesolicitors.co.uk)
- ND&P: Directors Beware: Joint and Several Liability Notices from HMRC (ndandp.co.uk)
- HCR Law: Joint and several liability: phoenixism (hcrlaw.com)
- inTAX: Piercing the corporate veil continued: Joint and Several Liability Notices (intaxltd.com)
- PKF Francis Clark: Spring Statement 2025: HMRC to combat phoenix company practices (pkf-francisclark.co.uk)
- Go Figure Financial: Phoenix companies: HMRC's tougher approach to contrived insolvencies (gofigurefinancial.com)
- HMRC Transformation Roadmap, July 2025 (gov.uk)
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