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.

Source: HMRC Employer Bulletin 38

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