Introduction and the law: introduction to securities
A security is an amount of money that HMRC requires any business to pay because we believe it may not pay its VAT, environmental taxes or PAYE/NICs.
HMRC will seek security only where there is serious risk to the revenue, and will do so reasonably and proportionately. Security will only be required from the minority of businesses and employers who do not pay, or are at risk of not paying their VAT, environmental taxes or PAYE/NICs.
High risk businesses and employers may be involved in
- phoenixism - repeated insolvency and new company creation
- repeated refusal to pay until HMRC is about to start bankruptcy or liquidation proceedings
- suspected tax fraud.
Any person required to give security must be served with a Notice of Requirement to give security (NOR).
A person is entitled to a review by HMRC of its appealable tax decisions and can appeal against
- for VAT/environmental taxes the requirement of any security
- for PAYE/NICs any requirement in the NOR.
If security we hold is not enough we can ask for further security to be given.
Security is usually a deposit held by HMRC or paid into a joint HMRC/customer interest bearing bank account. Security can also be a performance bond provided by an approved financial institution.
We require security as a condition of continuing to make taxable supplies for VAT and most environmental taxes. For indirect taxes, businesses and/or company officers that do not give security and who continue to make taxable supplies can be prosecuted. The criminal sanction for VAT is up to £5,000 for each taxable supply. For environmental taxes the criminal sanction is up to £5,000 for each offence. We may also seek compensation for loss of tax as a result of a criminal offence.
We will hold security for an indirect tax for no more than two years after which the need to retain security will be reviewed. While we hold security we can use it to satisfy tax debts for which security has been given. When we no longer require security we can repay it after setting-off against any other tax debts the person owes to us.
Employers can be prosecuted if they do not give security for PAYE/NICs when required. The criminal sanction is up to £5,000 for the offence of failing to provide security.
We will hold security for PAYE/NICs for a specified period of up to two years. While we hold security we can use it to satisfy tax debts for which security has been given. When we no longer require security we can repay it to the person who gave it to us after setting-off against any other tax debts that person owes us.