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HMRC internal manual

Securities Guidance

The security: using security: using a security deposit: setting-off VAT/environmental tax security deposits against HMRC debts

Under section 130 of the Finance Act 2008 (s130) HMRC can set-off amounts that are due to be repaid to a person (credits) against debts (debits) owed to HMRC by that person.

Set-off can only occur where the credit is owed to, and the debit is owed by, the same person.

S130 set-off does not apply where security is provided by a performance bond.

Set-off can only take place where the person’s debt is not disputed, or where the time for them to appeal has passed. The only debt to HMRC that cannot be set-off is costs.

Where security becomes repayable but the person then becomes insolvent, see SG66400.

You can make the set-off without the person’s permission but you must write to them, using Set off notification letter 23a, to warn them about what you are going to do. They do not have a right of appeal or review about your decision to set-off a credit against a debit.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

After the offset action has been completed write to the person again, using Set off confirmed letter 23b, to tell them what action you have taken.

Any money left after set-off should be repaid to the person, see SG62000.

You should ask the Southend Direct Receipts Team to make payment to the person’s tax account which contains the debt. Advise the Team of

  • the person’s name
  • their registration number
  • the Miscellaneous Cash Deposit (MCD) number.

After 14 days check head of duty systems to make sure the set-off has taken place.

Lift the Default Surcharge inhibit, using Form VAT719.

If the person has deregistered for VAT/environmental taxes take no action until the final liability (period 99/99) is on file.

Where security is insufficient to settle all the person’s debts advise Debt Management & Banking that further enforcement action will be needed.

More detailed guidance about set-off procedures is in the Debt Management and Banking Manual.

More information about set-off policy can be found on the Finance page on the intranet.