Security bonds can only be demanded by HMRC in relation to a number of predefined taxes (and Class 1 National Insurance Contributions).
For reference, these taxes are as follows:
- Class 1 National Insurance Contributions
- Landfill Tax
- Aggregates Levy
- Climate Change Levy
- Insurance Premium Tax
- Machine Games Duty
- General Betting Duty
- Pool Betting Duty
- Remote Gaming Duty
- Air Passenger Duty
The legislation surrounding HMRC security bonds comes from a number of distinct places. These are:
The Income Tax (Pay As You Earn) Regulations 2003
This law states that: ‘in circumstances where an officer of Revenue and Customs considers it necessary for the protection of the revenue, the officer may require a person …. to give security or further security for the payment of amounts in respect of which an employer described in regulation 97O (employers) is or may be accountable to HMRC …
s97N is supplemented by a number of other sections of the Income Tax (Pay as You Earn) Regulations 2003, these set out other details such as the way in which HMRC must demand any security and who the security can be demanded from.
HMRC can demand security from the employer, a director, company secretary or similar, or a shadow director of the company. If the employer is a Limited Liability Partnership, HMRC can require the security from any member of the Limited Liability Partnership.
HMRC can demand security from more than one of the persons named above on a joint and several basis. This means that all of the persons named by HMRC will be individually liable for the payment of the security, as well as liable together as a whole.
Part 3B of Schedule 4 to the Social Security (Contributions) Regulations 2001.
This law states that” In circumstances where an officer of Revenue and Customs considers it necessary for the protection of Class 1 contributions, the officer may require a person described in paragraph 29P(1) to give security or further security for the payment of amounts which an employer is or may be liable to pay to HMRC…”
Part 4 (2) (a) of Schedule 11 VAT Act 1994
This stipulates: “where it appears to the Commissioners requisite to do so for the protection of the revenue they may require a taxable person, as a condition of his supplying goods or services under a taxable supply, to give security, or further security, of such amount and in such manner as they may determine, for the payment of any VAT which is or may become due from him.
Section 131 Customs and Excise Management Act 1979
This type of bond refers specifically to where goods are removed without correct payment of duty. The law stipulates ‘If any goods which have been lawfully permitted to be removed for any purpose without payment of duty are unlawfully taken from any ship, aircraft, vehicle or place before that purpose is accomplished, the Commissioners may if they see fit enforce any bond given in respect thereof notwithstanding that any time prescribed in the bond for accomplishing that purpose has not expired.’
Class 1 National Insurance Contributions
The main statute permitting HMRC to require security to counteract the risk of unpaid tax in relation to Class 1 National Insurance Contributions is section 29N of the Social Security (Contributions) Regulations 2001. s29N states that HMRC officers can require security to be given where there is a threat that Class 1 National Insurance Contributions will go unpaid or have been unpaid.
This is supplemented by other sections in the Social Security (Contributions) Regulations 2001 which stipulate further details such as who the Notice of Requirement can be directed to, what it must contain and provisions about how long the security can be held for.
As with PAYE, HMRC can demand security from an employer, director, company secretary, shadow director or similar. They can also demand security from any member of a Limited Liability Partnership.
As with PAYE, liability for the security is on a joint and several basis for any of the persons whom HMRC address the Notice of Requirement.
Landfill Tax, Aggregates Levy, Climate Change Levy and Insurance Premium Tax
The relevant legislation for these taxes is as follows:
- Landfill Tax – Paragraph 31 of Schedule 5 to the Finance Act 1996
- Aggregate Levy – Section 26(1) of the Finance Act 2001
- Climate Change Levy – Paragraph 139(1) of Schedule 6 to the Finance Act 2000
- Insurance Premium Tax – Paragraph 24 of Schedule 7 to the Finance Act 1994
In all of the above, HMRC is allowed to require security “for the protection of the revenue”. This applies to situations where there has been a failure to pay, or a serious threat of future non-payment of each of the relevant taxes.
Author: Mike Smith