Since 6 April 2012 HMRC is able to require seriously non-compliant employers to provide a security to protect against non-payment.

This does not affect employers who have genuine payment difficulties, and does not apply to employers who

  • have agreed time to pay arrangements
  • are receiving support under the Business Support Service
  • only employ personal employees or carers.

Where HMRC think a security is necessary it will calculate the amount of the security based on the evidence of the individual case.

The employer may appeal to the Tax Tribunal against the notice requiring a security, or the amount. Alternatively they can ask to have their case reviewed first by HMRC’s internal review team before any Tribunal hearing.

There will be a criminal sanction for not providing a security when one has been required, with a fine of up to £5000.

The most common form of security is a cash deposit held by HMRC or paid into a joint HMRC/taxpayer interest bearing bank account. A security can also be a performance bond which is similar to a third party guarantee. It may be provided by any bank, building society or other financial institution approved by us.

Legislation

Part 4A of the Income Tax (Pay As You Earn) Regulations 2003 and Part 3B of Schedule 4 to the Social Security (Contributions) Regulations 2001.

Background: HMRC Employer Bulletin 38

Cases 

In Boship Lyons Hotels & others v HMRC [2018] TC6613 three companies, all under the control of one director, were given a requirement to give security for PAYE and NIC. 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 director's grounds for appeal were weak: he was going to appoint another director, but had not, he felt he was being personally victimised etc. The FTT dismissed the appeal finding that HMRC’s decision to impose security requirements on the companies was reasonable in all the circumstances.

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