What are the Restrictions Imposed on a Company with a Notice of Requirement?
The restrictions imposed on a company that has received a Notice of Requirement with a demand for security from HMRC will depend on which tax (or taxes) the Notice of Requirement was issued in respect of.
Generally, unless you are going to request a review or appeal the decision to issue the Notice of Requirement, you should pay the security as soon as possible to avoid the serious sanctions that arise from not complying with a Notice of Requirement. The sanctions effectively restrict what the recipient of the Notice of Requirement can do before they’ve paid the relevant security to HMRC.
For indirect taxes, businesses and/or company officers that do not give the security required by a Notice of Requirement can be prosecuted.
The criminal sanction for VAT is up to £5,000 per taxable supply made since the Notice of Requirement is served. This effectively means that once a Notice of Requirement is served, the company and officers are restricted from making any taxable supplies until the security has been paid. This is likely to mean that they will not be able to run the business as most businesses make taxable supplies as part of the normal course of business.
Environmental Taxes and Insurance Premium Tax
For environmental taxes and Insurance Premium Tax, the criminal sanction is up to £5,000 for each offence committed since the Notice of Requirement requiring the security was served.
The “offence” for each of these taxes is as follows:
- Landfill Tax – Carrying out taxable activities, which are described as making a taxable disposal or permitting another person to make a taxable disposal on behalf of the personal liable for the tax, whether or not the person liable for the tax knew of the disposal.
- Aggregates Levy – Being responsible for any aggregate being subjected to commercial exploitation in the United Kingdom.
- Climate Change Levy – Make a taxable supply where they would be liable to account for the levy or are liable to account for the levy on a taxable supply that another person makes to them.
- Insurance Premium Tax – Entering into taxable insurance contracts.
By making each of these actions an offence if the security demanded by the Notice of Requirement has not been paid, HMRC restricts the companies from taking these actions before they pay the security bond.
PAYE and NICs
For PAYE or NICs, HMRC does not impose any conditions on employees but employers can be prosecuted if they do not give security for the offence of failing to give security. This is a criminal offence for which the sanction is a fine of up to £5,000.
Need advice about a Notice of Requirement You’ve Received?
If you have received a Notice of Requirement from HMRC, it’s important that you take action as soon as possible. It’s a criminal offence not to comply with a Notice of Requirement and the sanctions are very serious. If you need advice, call us on 0800 074 6757 for a free, no obligation discussion, or use the live chat function on your screen.
Author: Mike Smith