This is our Frequently Asked Questions on security notices issued by HMRC. HMRC is now more committed than ever to leverage VAT security provisions as well as those relating to PAYE and NICs in order to aid in enforcement actions and the prosecution of directors who fail to comply. Despite the fact that these provisions have long been in existence, they are presently undergoing a notable resurgence in their application and significance and we are conducting a significant number of such cases.
Our tax team made up of specialist tax lawyers including ex-HMRC counsel can assist by providing you with bespoke advice to carefully manage your tax dispute. We can guide you through the complex the HMRC Notice of Requirement to give security (NOR) process. We have experience in negotiating with HMRC to drop Security Notices and of managing appeals against their decisions at all levels (including the leading appeal before the Upper-Tier Tax Tribunal). Members of the team include qualified Tax Solicitors and Tax Barristers whom have vast experience of tax laws and first hand commercial, litigation and advocacy experience.
What is a Security Deposit Letter of Notice?
A notice of requirement to give security, is a HMRC notice sent to a taxpayer, typically a business, informing them that they are required to provide security for future VAT, PAYE or NIC debts to HMRC by a specific deadline. Also known as a HMRC security deposit notice.
The Notice of Requirement to give security (NOR) is a formal written notice issued by HMRC to a taxpayer that it requires security from by a specified date. If not paid it can lead to criminal liability and a trial in the Magistrates Court. Usually a notice of requirement is not sent in the first instance as HMRC mostly gives a warning first, unless they feel there is a real risk that doing so will make you less likely to pay the taxes owed.
A Notice of Requirement (NOR) to give security states:
- The amount that is due;
- The time by which the amount due must be paid; and
- The available modes of payment
Why does HMRC issue Security Notices?
As a result of UK tax law, in particular as set out in HMRC’s internal manual on Securities Guidance, HMRC can require a taxable person to give an amount of monies to be deposited as security against certain taxes (unpaid PAYE, NIC or VAT) which has or will become due in the future. HMRC does this by sending a Notice of Requirement to give Security (NORS).
When does HMRC issue a Notice of Security?
These notices are usually issued to businesses with a history of non-compliance, whether unintentional or for more deliberate reasons. Importantly HMRC must explain the reasons and the taxpayer has 2 stage rights of appeal; either directly to the Tax Tribunal for VAT or via an internal HMRC review (by HMRC) which invariably upholds the HMRC decision.
Why might a business receive a security deposit letter of notice?
Businesses may receive a security deposit notice if they have a history of non-compliance with their tax obligations, such as failing to pay VAT or neglecting to meet their PAYE and national insurance obligations.
Are there different types of security deposit notices for different tax liabilities?
Yes, there are distinct types of notices. For instance, there are notices related to VAT liabilities and separate notices for PAYE and national insurance debts. Each type of notice has its own set of consequences.
What is a Security Notice for VAT?
HMRC issues Notice to give Security in respect of VAT when a business has a history of non-compliance with its VAT payments and continues to trade while owing unpaid taxes.
What is a Security Notice for PAYE and NICs?
HMRC issues security notices in respect of PAYE and NICs on the act of non-payment, regardless of business activity.
What are the consequences of receiving a security deposit notice?
The consequences of receiving a security deposit notice can vary based on the specific circumstances and the type of notice issued. The NOR generally explains to the person:
- HMRC’s power to require security
- the amount of security HMRC require
- the date on or before which security is to be given – this date must not be earlier than 30 days after the day on which the person receives the NOR
- how long HMRC will hold security
- the names of all the other persons who have been given an NOR requiring them to give security jointly and severally
- the means by which security can be given
- what happens if the recipient fails to provide security
- each and every person’s separate right of appeal.
Generally, the notice implies that the taxpayer is required to provide security to ensure the protection of revenue. Non-compliance with a VAT Security Notice may result in consequences specific to VAT, such as restrictions on the ability to claim VAT refunds, bid for contracts that require VAT compliance, or maintain good standing with HMRC for VAT-related matters.
Ignoring or failing to comply with a VAT Security Notice may lead to penalties, criminal prosecution, fines, and restrictions directly related to VAT. In extreme cases, criminal charges may be filed against the business and its directors.
Our Taxation practice is at the core of the firm. Got a dispute with HMRC? Our tax team is made up of specialist tax lawyers who can assist you to resolve your tax dispute. Our ex-HMRC lawyers will guide you on complex tax legislation to get you the best possible result.
What happens If I ignore the Security Notice?
Ignoring the notice may lead to reminders from the tax authority. Ignoring Notice of Security Requirement may lead to HMRC imposing significant penalties, difficulties in maintaining payroll for employees, and potential financial difficulties. If ignored further, the case may be referred to the Crown Prosecution Service (CPS) for a charging decision. If the CPS proceeds, the business and its directors may face charges in a magistrate’s court, potentially resulting in fines.
How can a business avoid receiving a security deposit notice?
To avoid receiving a security deposit notice, a business must ensure that it is consistently meeting its tax obligations and keeping them up-to-date. This includes paying taxes on time and complying with tax regulations.
What legal basis allows tax authorities to issue a notice of requirement to give security?
Tax authorities can issue a notice of requirement to give security when they consider it necessary for the protection of revenue. This provides officers with a broad discretionary power, and they must evaluate the specific circumstances of each case to determine whether such a notice is warranted and what value of security is necessary.
Is there any recourse for businesses that receive a security deposit notice?
Businesses that receive a security deposit notice may have options to challenge the notice or negotiate the terms of the required security. It’s advisable to seek legal counsel to explore potential courses of action.
How can I challenge a security deposit notice?
To challenge a security deposit notice, you initially appeal to the tax authority. If the decision isn’t overturned, you can request an independent review within HMRC within 30 days. If the decision remains unchanged, you can appeal to the First Tier Tribunal Tax Chamber, an independent judicial body.
How can I get more information or legal assistance regarding security deposit notices?
If you need more information or legal assistance related to security deposit notices and taxation matters, it’s recommended to consult with a tax attorney or a qualified legal professional specializing in taxation law. They can provide guidance and support tailored to your specific situation.
Why is it essential to address security deposit notices promptly and with legal assistance?
Seeking advice immediately upon receiving a notice is crucial, as it significantly impacts the chances of success in challenging the notice and avoiding severe consequences. Delaying action may limit the avenues for resolution and could result in a criminal conviction.
Security Notice Solicitors Advice
We have years of experience negotiating with HMRC and handling tax appeals at the Tax Tribunals and in the High Court dealing with contentious tax disputes. We also work extensively with Accountants, Tax Investigation practices and former HMRC Officers to ensure your matter is handled correctly. We have a dedicated team of barristers and solicitors defending HMRC Security Notices including representation at the Magistrates Courts and at the First-tier and Upper-tier Tax Tribunals.
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HMRC SECURITY NOTICES – ACT PROMPTLY
There is a limited time to respond to a HMRC Security Notice once it has been served which may be as short as 30 days from the date on the Notice letter. The options for defending against the criminal sanctions for non-compliance become more limited thereafter. You should take therefore obtain specific legal advice on your circumstances quickly.