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HMRC internal manual

Securities Guidance

The security: using security: using a security deposit: setting-off PAYE/NICs 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. This means that where an officer of a company provides a PAYE/NICs security it is not possible to set-off any part of that security against the company’s other debts to HMRC.

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. The letter gives the person 30 days to object to your action. They do not have a right of appeal or review about your decision to set-off a credit against a debit.

If the person asks you to allocate security to a different head of debt, then you might agree their request. You can also refuse the person’s request provided your decision is fair and reasonable, and takes into account all of the circumstances of the case.

If the person objects to the set-off you still have discretion to proceed with the set-off, provided your decision is fair and reasonable, and takes into account all of the circumstances of the case.

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

After 30 days has passed, make the set-off and 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 send a SAFE Transfer of payments request to Miscellaneous Charges Unit (MCU) to make payment to the tax account of the person(s) who has given security (PGS) which contains the debt.

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

Where security is insufficient to settle all the PGS’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.