Taxes have never been something that’s fun to do, but it is necessary, especially for businesses that handle lots of projects and clients. And while there’s no excitement in completing a tax obligation, being a good citizen is a better option than having to miss out on paying your tax debts. If you haven’t heard of a Director Penalty Notice or DPN, you’re in luck. However, for those who do, we hope it’s not because of something negative. But what is it, and should we be informed of what it is?
What is a Director Penalty Notice?
A Director Penalty Notice, or DPN, is a legal notice issued by the taxation office to company directors as a warning that they may be personally liable for their company’s unpaid tax debts. In simpler terms, it means that the company is not paying its right amount of taxes, so the taxation office can chase the directors for compliance and payment, holding them accountable for keeping the business running.
How Can a DPN Affect You Even if You’re Not a Director?
If you are not a director or the business owner of the company, you might still feel the impact of a Director Penalty Notice in a lot of ways; one of the most common is losing your job as an employee, a delay in payment if you are a supplier of this organisation, and even losing access to benefits if you are a customer.
Types of Director Penalty Notices
The taxation office has two types of DPNs that they usually issue, both of which come with different consequences.
Non-Lockdown DPN. This notice is issued when a company hasn’t paid its reported tax obligations within the given number of days. However, this can be resolved by paying the debt or entering into a payment arrangement with the taxation office to keep them from liquidating the company.
Lockdown DPN. On the other hand, if your company fails to lodge its tax returns and pay the debts, directors now are automatically liable for those unpaid amounts and must be paid in full to continue operating.
How to Prevent Receiving a DPN
Of course, the best way to deal with a DPN is to avoid getting one in the first place. So before it happens, here’s what you can do:
- Pay your taxes in due time, or if you cannot pay yet, file on time for lodge tax returns.
- When the company finances are starting to cause liabilities and concerns, seeking advice from a financial adviser or a professional can prevent a bigger issue from arising, all while keeping an eye on your tax obligations and schedules.
Be financially responsible.
Having a higher position means having bigger shoes to fill, and that means you are responsible and accountable not only to the employees, suppliers, and contractors, but also to the company. Keep in mind that a Director Penalty Notice might not be a reflection of the company’s personality but is something that would shake your organisation. Keep an open mind and resolve it immediately when it happens.
