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Notice of Security – do not ignore!

25th Jan 2020
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There has been a flurry of appeals in relation to a ‘Notice of Security.’

If you have been involved in a previous business that has closed, owing VAT or other taxes, HMRC can issue a formal Notice of Security under VAT Act 1994, Sch 11. (There is similar legislation in relation to other taxes.) There is a link on the HMRC website which explains this: https://www.gov.uk/guidance/tax-deposits-and-bonds-employers-and-traders

You can of course ask to HMRC to review their decision. You can then appeal to the First Tier Tribunal. At either stage you can challenge the decision in principle, or the quantum of the security, or both.

The Court of Appeal considered this issue in the case of John Dee Limited v Customs and Excise Commissioners [1995] STC 941. The Court held: “the tribunal had to examine whether it had appeared requisite to the commissioners for the protection of the revenue, to require the taxpayer to give security. In examining whether that statutory condition was satisfied the tribunal had to consider whether the commissioners had acted in a way in which no reasonable panel of commissioners could have acted or whether they had taken into account some irrelevant matter or had disregarded something to which they should have given weight.”

This principle has been followed in numerous decisions since then.

The taxpayer should also note that this means that the Tribunal is supervisory, not appellate. The FTT has to ask whether HMRC have acted unreasonably, not whether they are wrong. This is a higher bar to scale.

You can read how this was applied in this recent decision: https://www.bailii.org/uk/cases/UKFTT/TC/2019/TC07477.html

 

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