Kevin McLeod
Written By Kevin McLeod
Licensed Insolvency Practitioner
July 18th, 2023

One of the weapons in HMRC’s arsenal is the ability to issue an organisation with a Notice of Requirement for VAT security where it believes there is an increased risk VAT will go unpaid. This is likely to be the case where a current business or previous business connected to the same individuals has failed to meet its VAT obligations. If the notice is ignored, HMRC has the right to fine and prevent the supply of taxable goods until the security is paid.     

Preventing the Supply of Taxable Goods

Immediate action is required by the company on receipt of a Notice of Requirement (NOR). If the requirement to pay security is disputed, the taxpayer can appeal but must do so within 30 days. If the security is not paid or disputed, HMRC is within its rights to prevent the supply of taxable goods. Continuing to trade without the issue being resolved is a criminal offence. If organisations that have received a Notice of Requirement continue to trade, they can be fined £5,000 for every transaction they enter into without paying security.

Clearly, with the prospect of such substantial fines, it is essential you take action as soon as you receive a Notice of Requirement to give security.  

Grounds for Appeal

The decision by HMRC to issue a Notice of Requirement will usually be based on two factors, both of which can be disputed.

  • A Notice of Requirement may be issued if a previous business you were involved with, or individuals connected to a previous business you were involved with, had a poor compliance history. However, if you can prove that those individuals do not have a controlling influence on the new business, you may be able to dispute the requirement to pay security.

     

  • The level of security you will be asked to pay will be based on the estimated VAT liability after four months (monthly VAT returns) or six months (quarterly VAT returns) plus any existing arrears from a previous business. If the new business is yet to submit any VAT returns, these estimates will be based on turnover levels in the previous business. This may not be applicable because the nature of the business may have intrinsically changed, making the request for VAT prepayment inaccurate.    

You must act now

Whether you choose to appeal the decision or pay the requested security, you must act IMMEDIATELY. Continuing to trade without paying VAT security is a criminal offence that can lead to a £5,000 fine for every transaction entered into. For expert assistance, Please contact 020 8444 3400 today for an immediate, confidential and no-obligation advice you need.

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