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HMRC internal manual

Securities Guidance

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HM Revenue & Customs
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Introduction and the law: the law on security: Value Added Tax: power to require security for the payment of VAT

Paragraph 4(1A) and paragraph 4(2) of Schedule 11 to the Value Added Tax Act 1994 give the Commissioners the power to require security.

Paragraph 4(1A) is the power to require security before releasing a VAT credit, see SG29000.

4(1A) If they think it necessary for the protection of the revenue, the Commissioners may require, as a condition of making any VAT credit, the giving of such security for the amount of the payment as appears to them appropriate.

Paragraph 4(2)(a) is the power to require security in case the taxable person doesn’t pay VAT. Paragraph 4(2)(b) is the power to require security from one person for the payment of VAT due by another person, a provision which is now redundant following the ruling of the European Court of Justice in the case of the Federation of Technological Industries and Others.

4(2) If they think it necessary for the protection of the revenue, the Commissioners may require a taxable person, as a condition of his supplying or being supplied with goods or services under a taxable supply, to give security, or further security, for the payment of any VAT that is or may become due from-

(a) the taxable person, or

(b) any person by or to whom relevant goods or services are supplied.

A person is a taxable person for the purposes of this Act while they are, or are required to be, registered under this Act (section 3(1) of the Value Added Tax Act 1994).