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Defending a HMRC Security Notice of Requirement

A HMRC Security Notice is a formal notice issued by HM Revenue and Customs (HMRC) to an individual or business requiring them to provide security for certain future tax liabilities. It is a tool used by HMRC where they believe there is a risk of tax loss.

As a result of UK tax law, HMRC can require a taxable person to give an amount of monies to be deposited as security against tax (such as 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).

The Notice of Requirement is the formal written notice to a person informing them of the monies owed to HMRC as direct or indirect tax which has not been paid or in some cases may be due in the future and there is a risk that it will not be paid then. In such cases, HMRC requires a taxable person to pay a security deposit by a date specified in the security notice.

The security notice can be issued if HMRC has reasonable grounds to believe that a company or person may not pay their future tax liabilities, for example, if they have a history of non-payment or have committed tax fraud in the past. The notice requires the recipient to provide security, such as a cash deposit or a guarantee from a bank or other financial institution, to cover potential future tax liabilities.

HMRC Enforcement & CPS Prosecution

If the recipient fails to provide the requested security, HMRC can take enforcement action against them, such as seizing their assets or taking legal action to recover the outstanding tax. HMRC can also instruct the Crown Prosecution Service (CPS) to commence a Prosecution over a strict liability offence which results in a criminal record for Directors and a fine of up to £20,000 for each taxable supply made without giving the security. The recipient can appeal against the imposition of a Security Notice, which is where legal representation is sensibly required to challenge HMRC’s decision (which can otherwise lead to prosecution).

The CPS will charge a director or company or other recipient of an unpaid security notice for non-payment when requested to do so by HMRC. The typical criminal charges that the HMRC will bring before the Magistrates Court are:

[NAME] on [DATE] at [LOCATION] having been required by an officer of Revenue and Customs, failed to give security in respect of ‘Pay As You Earn’ under a Notice of Requirement dated [DATE] for the payment of amounts for which you were accountable to HM Revenue and Customs in accordance with Part 4A of the Income Tax (Pay As You Earn) Regulations 2003. Contrary to section 684(4A) Income Tax (Earnings and Pensions) Act 2003. (IT03001)

[NAME] on [DATE] at [LOCATION] having been required by an officer of Revenue and Customs, failed to give security, or further security in respect of National Insurance Contributions, for the payment of amounts for which you were accountable to HM Revenue and Customs in accordance with Part 3B of Schedule 4 of the Social Security (Contributions) Regulations 2001 Contrary to section 684(4A) Income Tax (Earnings and Pensions) Act 2003. (IT03001)


Our tax team made up of specialist tax lawyers can assist by providing you with a bespoke tax solution to your tax dispute. We can guide you through the complex NORs 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.

Who can be sent a notice of requirement by HMRC?

A Notice of Requirement to give security can be issued to any qualifying taxable person as defined by the law. A taxable person has been defined in the VAT Act, 1994; as any person or business that is registered or is required to be registered for Value-Added Tax (VAT) under the law.

This means that you may be sent a Notice of Requirement to give security either in your individual capacity or as a director of the company under your control.

Why does HMRC send a notice of requirement?

HMRC officers after investigating the case only send a notice of requirement to a person if it is reasonable to hold the apprehension that:

  1. The person in control of the business has a history of non-compliance with tax obligations in their previous business or, they have failed to comply with their Tax obligations in relation to their current business.
  2. If there is a reason to believe that they might fail to comply with their Tax obligations.

In usual circumstances, HMRC officers first send a letter of warning to the person which informs them that security may be required and the reasons for such security.

However, if they believe that a prior warning letter will elevate the risk of non-compliance, HMRC may send or give a notice of requirement to give security directly, without having sent a letter of warning.

How is security under the notice of requirement calculated?

HMRC when calculating the security deposit required for a future revenue risk considers the latest returns on file with HMRC and the risk in 3 months (for quarterly returns). Please see the below example;

Example – Quarterly filer

VAT returns     Net tax due      Outcome

05/10   £10,000           –

08/10   £15,000           –

Total    £25,000           6 months’ tax month (for monthly returns).

The amount of security required if the person makes quarterly returns is £25,000 before HMRC officers add any debt that you may have accrued. HMRC must always allow a person who makes quarterly returns to pay the lower amount of security and make monthly returns – £25,000 x 4 = £16,667 = 4 months’ tax, which is significantly lower.

If the person’s most recent returns are not indicative of their usual trading pattern they may use older returns in your calculation. It should be noted that HMRC must be able to defend their calculation at tribunal if the person appeals.

What are the consequences of receiving a notice of requirement?

The consequences of receiving a notice of requirement carry the same theme of penalising the taxable person by a way of fine but the fines may vary by their categories.

PAYE is HMRC system to collect Income Tax and National Insurance from employment & Class 1 National Insurance contributions (paid by the employer) on benefits and expenses to their employees and qualifies them for other state benefits; it is a criminal offence not to give the security in full. In this instance, HMRC can take you to Court and they may fine you up to £5,000.

For VAT, Landfill Tax, Aggregates Levy, Insurance Premium Tax & Climate Change Levy; It is a criminal offence not to give the security in full. HMRC can take you to Court and they may fine you up to £5,000 for each taxable supply made.

In case of an NOR sent for Machine Games Duty, HMRC have the ability to take away your registration and if you are not yet registered anyone in a business contract with you may become liable to pay your duty

If you have received a notice of requirement and you continue to make taxable supplies without giving the security in full, you may be prosecuted. In the event of a successful prosecution, you may have to pay a fine of up to £20,000 for each taxable supply you make without giving the security. This means that time is of the essence and you must act now to seek legal advice.

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.

Phoenix Company Security Notices?

Notice of security requirement may also be sent to a business suspected of being a ‘Phoenix company’. This means that a company is simply a new company rising from the ashes of the old one; which could be the case where the new business is essentially connected to the previous business by being under control of the same individuals who have failed to meet their tax obligations in the past. If the notice is ignored, HMRC has the right to fine and prevent the supply of taxable goods until the security is paid.

Can I challenge or appeal a notice of requirement?

The notice of requirement (NOR) will also advise you of your right to appeal. The person has 31 days from the date the notice was given to appeal. You must appeal to the HMRC, in writing, specifying clearly the grounds of appeal for the decision.

Once the appeal is submitted, the decision making officer of HMRC may continue to have further discussions with you to try to resolve the dispute. Agreement may be reached as a result of these discussions and the appeal settled.

Alternatively, you could also ask the decision to be reviewed, and/or, ask for the appeal to be heard by the tribunal.

How can I pay the security under the notice of requirement?

HMRC only accepts the following forms of security:

  1. an electronic payment to a specified HM Revenue and Customs (HMRC) bank account
  2. a cheque or banker’s draft
  3. a guarantee in the form of a performance bond authorised and approved by a financial institution

HMRC does not, under any circumstances accept property or items such as high value motor vehicles or boats as security.

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.

The depth of our combined capabilities allows us to represent clients in a variety of situations, whether advising private or corporate clients during tax audits, pursuing administrative appeals, or litigating tax matters at the Tax Tribunal, Court or in tax appeals. Clients hire us because of our extensive experience in all areas, and especially because of our litigation experience – when necessary, we know when to go to the Tax Tribunal and we know how to litigate.

Case Law on Security Notices

Boship Lions Farm Hotel Ltd & Ors v Revenue & Customs [2018] UKFTT 411 (TC)

The case considered the appeal against the Notice of Requirement to give security against the appellants PAYEand NIC liabilities. At the time the decision to issue the notices of requirement to give security was taken Sheikh Abid Gulzar t/a Albany Lions Hotel owed £47,626.49 PAYE and NIC as well as having a VAT liability of £16,582.74, Sheikh Abid Gulzar t/a Boship Lions Hotel owed £79,825.08 PAYE and NIC and Lions Hotels Ltd had become insolvent on 13 January 2017 with a PAYE and NIC debt of £260,013.05.

The notices were issued on 1 March 2017 and were sent by post to the registered office and the principal places of business of the three companies. 

Notices were also issued to Mr Gulzar, the director and 100% shareholder of the companies, in his personal capacity, under Reg 97P(1) of the Income Tax (Pay As You Earn) Regulations 2003, as set out below.  Other businesses in the ownership or under the control or influence of Mr Gulzar also owed monies to HMRC.

A review of the decisions to give a notice of security requirement was requested by Mr Gulzar on 30 March 2017, although no further information was provided by him at that time.  HMRC sought further clarification of the reasons for requesting a review on 12 May 2017 and Mr Gulzar replied saying that he had problems in his previous businesses due to issues with his bank and that although there had been problems in the past all the debts had eventually been paid.  He did not therefore consider that the new businesses represented a risk to HMRC.

The Tribunal however, considering the previous history of the businesses concerned, and the previous history of the director, Mr Gulzar, was satisfied that the decision which HMRC took that the giving of security was necessary in these cases was not unreasonable. The appellant’s application was therefore dismissed. 

UBI Ltd v Revenue & Customs (INCOME TAX/CORPORATION TAX: [2018] UKFTT 620 (TC) (17 October 2018)

This appeal was made against a Notice of Requirement, that the Appellant provide security to the Respondents in respect of its liability to PAYE and NICs. The issue to consider before the Tribunal was whether it was reasonable of the Respondents to consider it necessary for the protection of the Revenue to require the Appellant to provide security.  The security sought was: £43,667.90 in respect of PAYE, and £67,496.68 in respect of NICs.

The appellant had to persuade the Tribunal that the decision to require security was, at the time it was taken, either a decision which no reasonable decision-maker could have reached or that it was flawed in the sense that irrelevant matters were taken into account or relevant matters were not taken into account.

The outcome was that the Appellant failed to satisfy the tribunal that the Respondents’ decision to require security contained an error of law or was so unreasonable that no commissioners, properly directed, could have reached those decisions.

HMRC Notice of Security Lawyers

We have a proven track record of successfully defending our clients against Notices of Security from HM Revenue and Customs (HMRC) and can challenge these notices by submitting written representations against their imposition. Our legal team is highly experienced and knowledgeable in every aspect of the HMRC appeal process, including defending against Crown Prosecution Service (CPS) prosecutions. We have firsthand experience dealing with HMRC at all levels, including the First-Tier and Upper-Tier Tax Tribunals, as well as the Magistrates Court, with appeals to the Crown Court. We possess a thorough understanding of the legal process pertaining to Security Notices.

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We provide the highest quality legal representation in negotiating with HMRC, defending against allegations in tax enquiries, tax fraud investigations, criminal tax evasion cases or similar investigations, including those pertaining to the imposition of a Security and CPS prosecutions for failure to pay such Security Notices. We base our defence on grounds of reasonableness or ongoing Tax Tribunal appeals, and can often make appeals out of time.

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.