HMRC Security Notices

When can HMRC Issue a Security Notice?

If you have failed to pay a VAT return or assessment or PAYE/NIC bill to HMRC on time then Revenue may demand a bond or deposit as security to settle future tax liabilities. There are a number of ways to defeat such security demands from HMRC and you should act promptly and take legal advice at the outset as HMRC have the power to issue personal liability demands on directors and to refer unpaid security notices to the Crown Prosecution Service for prosecution resulting in substantial fines and criminal record for the director(s).

Letter from HMRC Securities Team (Indv and Small Business Compliance)?

If you have outstanding debt owed to HMRC in respect of PAYE, NIC, VAT, Corporation Tax, or CIS, you may receive a ‘Notice of Requirement to give Security’ letter from the HMRC Securities Team (Indv and Small Business Compliance). The letter may also come from ‘Fraud Investigation Service – Securities Team.’ This can be intimidating and is designed to be however this letter does not necessarily signify a tax fraud investigation but it is the ringing bell that you could become guilty of a Criminal Offence if you fail to pay the security notice.

The HMRC Securities Team sends these letters to both the relevant limited company and the directors personally making you jointly and severally liable for the security notice. Receiving such a letter is a serious matter, as non-compliance with the requirement is a criminal offence.

It is crucial to promptly address this situation and seek appropriate legal advice to ensure the situation with HMRC is managed carefully and your rights are protected (for example by an appeal to the First Tier Tax Tribunal). Our tax defence team is ex-HMRC and ex-Big 4 (PWC and Deloitte) – we’re here to assist you in effectively navigating through these matters and achieving the best possible outcome.

Our tax team is composed of heavily experienced and leading tax solicitors and barristers who can handle your Security Notice tax dispute. Our leading counsel was formerly in-house at HMRC and has has lead two of the Big 4 accountancy tax litigation disputes practices (PWC and Deloitte). Our lawyers have decades of expertise in dealing with complex tax matters, and are deft at negotiating with HMRC and handling tax appeals before the First-Tier and Upper-Tier Tax Tribunals and in the High Court, Magistrates Court and Crown Court.

What is a HMRC Notice of Requirement to give Security (NOR)?

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

Is it a Criminal Offence not to pay dues after receiving Notice of Requirement (NOR)?

Receiving a notice of requirement is a matter not be taken lightly as not complying with requirements that if not adhered is a criminal offence. Similarly, in not responding to the notice a director of a limited company may become personally liable for the due amount requested. Yes, it is a criminal offence to continue to make or receive taxable supplies without giving the security shown on a notice of requirement.

Taxable supplies mean the supply of any goods or services that are taxable under the Laws of England & Wales. This includes supplies made between members of a group registration. 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.  If you’re involved in a business that continues to make or receive taxable supplies without giving the security, you may be prosecuted along with each individual involved in that business. You may also be personally responsible for paying any fines and compensation awarded by the court.

What are the CPS Criminal Charges for not paying a HMRC Security Notice of Requirement?

Here are the typical charges you could face from the Crown Prosecution Service (CPS) on behalf of HMRC under the Prosecution of Offences Act 1985:

[NAME] on [DATE] in [AREA] having been required by an officer of Revenue and Customs, failed to give security, or further security, in respect of National Insurance contributions , which you were required to pay 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 3B of Schedule 4 to the Social Security (Contributions) Regulations 2001 Contrary to Section 684(4A) of the Income Tax (Earnings and Pensions) Act 2003 Contrary to section 684(4A) Income Tax (Earnings and Pensions) Act 2003. (IT03001).

Typical charges laid by CPS for NICs

[NAME] on [DATE] in [AREA] having been required by an officer of Revenue and Customs, failed to give security, or further security, in respect of Pay As You Earn, which you were required to pay by 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) of the Income Tax (Earnings and Pensions) Act 2003 Contrary to section 684(4A) Income Tax (Earnings and Pensions) Act 2003. (IT03001)

Typical charges laid by CPS for PAYE

How much Security can HMRC Request?

HMRC can request 4-6 months of payments up front, plus an amount equal to the current arrears.  If you were 6 months behind in payments, they would request a years’ worth of tax or duty to be paid, up front, or face the consequences.

What happens if you don’t pay a HMRC Security Notice?

• 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, the 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, the 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.

How long can HMRC keep the security following a notice of requirement?

• In the case of an NOR for PAYE or Class 1 National Insurance contributions, the HMRC may retain your security for 2 years, however once HMRC believe there is no risk of you not paying your tax on time, they will return the security sooner.

• For VAT, Landfill Tax, Aggregates Levy, Insurance Premium Tax & Climate Change Levy; 12 months for a business on monthly returns or 2 years for a business on quarterly returns

• For Machine Games Duty, the HMRC will return the security sooner if they think there’s no longer a risk you won’t pay on time.

How we can offer assistance in removing an NOR?

We can offer assistance and draft a Time-to-Pay Arrangement, to offer the HMRC as an alternative arrangement to the Security Notice. Such an arrangement is agreed by HMRC, as it conveniently settles the arrears in a timely fashion and enables the business to maintain ongoing liabilities. With the right approach and advice, the HMRC will more than likely remove the Security Notice served upon you.

Depending on the circumstances of the business, it may be possible to appeal and get the Notice removed, for instance;

• If an office holder (usually Director) of the new company was not directly responsible for the failures of the previous business he was associated with, it is unreasonable of HMRC to ask for security in such circumstances.
• If a previous business failed for reasons beyond its control. For example, a major customer going bust and the knock on effect causing failure, again, it may be considered unreasonable to ask for security from such a business and a possible appeal may lie.
• In case of a new business (picking up after a failed Company) is financially sound and has its returns submitted on time and paid in full, it may not be reasonable to request security as it would be nearly impossible to justify a revenue risk.
• If HMRC have failed to conduct thorough enquiry into the new company, they could not possibly be in any position to assess potential risk to revenue therefore, it would be unreasonable to demand for security.

Can I appeal the notice of requirement?

Yes. We have a proven track record of successfully appealing securities following a notice of requirement from HMRC and preventing them instigating criminal proceedings against directors. Our specialist Tax Solicitors and Barristers deliver expert technical knowledge, strong negotiation skills and advice which can make a pronounced difference to eventual tax penalties, charges and liability.

The HMRC Appeal Process

If you disagree with HMRC’s notice of requirement, there is a 2-stage process to dispute their decision:

Stage 1: Give notice of appeal to HMRC. This must be done in writing within 30 days of HMRC’s notice of their notice of requirement. HMRC will confirm their first decision, amend their decision or agree with the your assessment.

Stage 2: If your position cannot be agreed with HMRC in stage 1 then you have two further options:

i. HMRC can offer an internal review of the disputed decision (note that you can request this at any time). The review is an entirely internal procedure completed not by the original HMRC decision maker but by a different HMRC officer.

ii. A taxpayer can appeal to the First Tier Tax Tribunal if the taxpayer cannot agree their position following the review. The independent tribunal will make a determination on the case. A further appeal is permitted if a taxpayer does not agree with the decision.

More detailed guidance on HMRC Penalty Appeals can be found: here.

Case Study: D-Media Communications v HMRC [2016] UKFTT 430 (17 June 2016)

D-Media Communications made an appeal against the decision of the HMRC to issue a Notice of Requirement to require security to be given for PAYE and NIC under Part 4A of the Income Tax (Pay As You Earn) Regulations 2003 (‘PAYE Regulations’) and Part 3B of Schedule 4 to the Social Security (Contributions) Regulations 2001 (“NICs Regulations”). It required an amount of security to be given in relation to PAYE of £79,127.55, and in relation to NICs, £68,007.33.  The total amount of security required was therefore £147,134.88.  The period for which the security was required to be given was 24 months and the date stated for the giving of the security was 13 October 2015.

At the time of the decision to give the Notice of Requirement, the HMRC officer took into account the facts that D-Media had PAYE and NICs debts dating back to June 2014, that Real Time Information (RTI) returns had been rendered without payment in full, that 14 RTI returns remained unpaid, that the last remittance had been paid in January 2015 and set off against the September 2014 debt and that the total debt for 2014/15 and 2015/16 amounted to £111,366.71.

The grounds taken for appeal were that the HMRC failed to thoroughly investigate the matter and had it done so, it would have arrived fair and just conclusion that security was neither appropriate nor required. The tribunal allowed the appeal and the NOR was varied to the extent of substituting for the sum of £147,134.88 the revised sum of £25,000 to be paid within 30 days of the decision.

Case Study: William Martland v The Commissioners for HM Revenue and Customs (Tax) [2018] UKUT 178 (TCC) (1 June 2018)

The FTT had refused the appellants application for permission to notify a late appeal to the FTT in connection with an assessment of Excise Duty of £24,694 and a related wrongdoing penalty of £9,507. Accordingly, it struck out the appeal. The appellant sought permission to appeal against the FTT decision on two grounds; Firstly, that the FTT had wrongly mixed together two questions that it was required to consider separately, namely (a) the reason for the delay; and (b) the consequences of a refusal to extend time. Secondly, that the FTT had clearly been wrong to find there was no sufficient reason for extending time to appeal, which should be the exception rather than the rule.

The Upper Tribunal found no error of law in the FTT’s decision and therefore no basis to interfere with it and subsequently dismissed the appeal.

Case Study: Pachangas Mexican Restaurant Ltd v HMRC [2019] UKFTT 436 (TC)

The appellant had received a notice of requirement to give security but it did not disclose any reason for the decision, upon further inquiry by the appellant he was informed that due to his business links with non-compliant businesses, he was taken to be at risk of the same. Due to failure to provide reasons for Notice to require giving of security, and not being afforded any chance of making representations, or to comment upon any of the facts before the decision was made, was found to be a serious shortcoming on the part of the HMRC. Without deliberating on any findings of fact, the Tribunal held that the decision dated 27^th September 2017 was quashed and the Notice was subsequently set aside.

Case Study: Swann v Revenue & Customs [2020] UKFTT 176 (TC) (02 April 2020)

The Tribunal followed the guidance set out in Martland vs HMRC [2018] UKUT 178 (TCC). A couple of factors were taken into account to consider whether the appeal could be admitted after the time for it had lapsed; the delay was just five days and so neither serious nor significant, that the Appellant’s explanation for his delay was that he had been on holiday in late September 2019 when the review decision was received and then ill, the possible prejudice to the Appellant if the appeal was not admitted, and that the Respondents did not object to an extension of time being granted, which indicated that they would suffer no prejudice if the appeal was admitted. The appeal was admitted and then the issue to be considered were whether it was reasonable for the Respondents (HMRC) to require security, whether, in the circumstances of this case, the security was sought from an appropriate person, whether the amount sought was appropriate, and the length of time over which the security should be held. The Appellant has failed to satisfy that the decision to require security from him, as director and shareholder of Auto Claims (UK) Limited, was unreasonable.  However, because the reviewing officer did not take into account the six payments of PAYE and NICs made by Auto Claims (UK) Limited in August 2019, the tribunal found that there was an incorrect calculation of the security therefore, the Respondents were required to recalculate the security which was required, using their standard formula and using the figures as at 23 September 2019. The tribunal allowed the appeal to the extent of varying the security calculated under the Notice of Requirement was varied.

Case Study: Eunoia Initiatives v Revenue & Customs (VAT – Notice of Requirement to provide security) [2021] UKFTT 65 (TC) (09 March 2021)

The issue was that the appeal was made out of time against a Notice of Requirement to Provide Security (NOR) in relation to VAT issued by HMRC. The appeal was made 16 months and 1 day late. To consider whether the delay in appeal could be allowed, Martland vs HMRC [2018] UKUT 178 (TCC) was followed as guide. The point at issue was whether the there was any reasonable excuse for the significant delay. The reason for the delay was that the director of the Appellant was not aware (despite the NOR setting it out) that there was a right of Appeal. She had passed the NOR straight on to her solicitors and the next correspondence she had received failed to mention appeal rights. The tribunal found that due to considerable prejudice to the Appellant and the director, and the fact that they consistently engaged with HMRC, meant that the overall circumstances of the case did merit the full facts case being heard, notwithstanding the considerable delay in the making of the appeal, therefore the appeal was allowed.

Case Study: FMC (Fabrics Maintenance Contractors) Ltd v Revenue And Customs (VALUE ADDED TAX – Notice of requirement to provide security) [2021] UKFTT 233.

The tribunal had to address whether or not the decision by the Respondents to require the Appellant to provide the level of security which they have was unreasonable. It was found that the security required was not unreasonable as there were substantial arrears of VAT owing by the Appellant at that time.  That alone was indicative of the fact that requiring the Appellant to provide security of some sort might not be unreasonable.  However, when that was coupled with the extensive defaults by the Appellant in the previous few years, the decision to require security was, eminently reasonable.  Some support for the conclusion that past defaults are a highly relevant matter to consider in this context may be found in the earlier first instance decisions in Lewis Ball and Southend United.  Those decisions suggest that the Respondents (HMRC)’ power to require security for the protection of the revenue may reasonably be exercised in any case where there has been habitual and persistent late payment in the past.  Even if a taxpayer genuinely intends to meet its VAT obligations in full in due course that does not mean that it will inevitably succeed in doing so.  It is perfectly possible that, despite those intentions, it will be forced into insolvent liquidation at a time when it owes a considerable amount of VAT to the Respondents. The Appellant could not satisfy the Tribunal that the decision of the HMRC  to require security of £100,779.39 as set out in the NOR was unreasonable under the circumstances and therefore the appeal was subsequently dismissed.

Legal Representations against a Notice of Security

We have successfully defended clients against NOR Security cases and can challenge HMRC notices of intention to impose a security by making written representations against the Imposition of a Notice of Security. We can help you at every stage of the HMRC appeal process and have defended CPS prosecutions. Our legal team has first-hand experience and knowledge of how HMRC works at every level at First-Tier and Upper-Tier Tax Tribunals and at the Magistrates Court (with appeals to the Crown Court). We understand the legal process in relation to Security Notices. 

We provide the very best representation in negotiations with HMRC and defending all allegations in a tax enquiry, tax fraud investigation, criminal tax evasion or similar investigation including in defending against the imposition of a Security and CPS prosecutions for failure to pay such Security notices on the basis of reasonableness or ongoing Tax Tribunal appeal (we are able to make appeals out of time).