What is a notice of requirement and VAT security?

HMRC will issue an organisation with a Notice of Requirement and VAT Security when it believes a current or previous business has failed to meet its VAT obligations, or believes that such a risk is likely to arise in the future.

If the notice is ignored, HMRC has the right to fine the organisation and prevent the supply of taxable goods until a security payment is made.

In one example of a case like this, a former TV chef was fined £10,000 after a Notice of Requirement and VAT Security was ignored and his restaurants continued to trade for three months. The chef came to the attention of HMRC when a previous company de-registered for VAT in 2011, owing nearly £100,000 in VAT arrears. The following day he registered two new companies. As a result of previous arrears, the chef was ordered to pay £72,000 in VAT upfront.

What should I do if my business is issued with a Notice of Requirement and VAT Security?

Immediate action is required by the taxpayer on receipt of a Notice of Requirement. If the action is disputed, an appeals process must be lodged within 30 days. There can be grounds for appeal, as the HMRC’s decision is often based on two factors that can be refuted. These are:

• The previous business, or individuals connected to the previous business, have a poor compliance history and now have a controlling influence on the new business that has been served the notice. If the business can demonstrate that the liable personnel have no controlling influence on the new business, the risk will no longer exist
• The new business may not have yet submitted any returns, so any request for advance VAT payment is based on turnover levels in the previous business. The nature of the business may have intrinsically changed, and so any estimation of VAT for pre-payment could be wholly inaccurate.