If HMRC think there’s a risk a business won’t pay its VAT bill, they may ask for a bond or deposit payment. This acts as a security against possible late or non-payment.
What is a VAT Notice of Requirement?
HMRC send this to request a business pays a VAT security. This might be because a VAT refund claim is likely to take time to verify, or for large or unusual claims. The security is a condition of issuing the VAT credit.
Why have HMRC asked for a VAT security?
There are several reasons why a business or trader may receive a VAT security request. It could be that you have current or past VAT arrears, or have previous VAT offences. Although a warning letter will usually be issued, it isn’t always the case. If HMRC considers that sending a warning letter increases the likelihood of not being paid, they won’t send one.
How are VAT securities calculated?
The security is usually the equivalent to the amount of VAT due to be paid to HMRC for a set period, typically four or six months, depending whether you submit monthly or quarterly VAT returns. An amount will be added for any arrears currently outstanding for the business.
The amount of security they request you to pay won’t be any higher than the amount of credit being considered. HMRC will use the information they have at that time to calculate the amount of security. You can also request an independent review or appeal a Notice of Requirement at a tribunal, as long as you request this within 30 days.
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I'm an experienced and fully AAT and ACCA qualified accountant, who is enthusiastic about helping business owners succeed. I also love cooking and needlepoint (at different times!). Learn more about Beth.