If you’ve received a NOR, it’s imperative that you don’t ignore it, and act quickly to make payment or raise an appeal.

In this article we’ve explained what a NOR is, how security may be calculated, the potential consequences if you fail to provide it, and avenues for appeal.

What is a Notice of Requirement for security (NOR)?

NORs are essentially demands for a business or individual to pay a deposit (security) to cover future liabilities, where HMRC believes there is a risk that they will default on those liabilities. They are generally issued by HMRC’s Securities Team (Individual and Small Business Compliance) and are usually triggered by an accumulation of arrears or a pattern of late payment.

NORs can cover National Insurance Contributions (NICs), Pay As You Earn (PAYE), VAT, Corporation Tax, or Construction Industry Scheme (CIS) payments.

Where the business is a company, a NOR will also be issued to the director/s and the director/s will also be held liable for the security.

How much security can be requested?

The security can be calculated using a four to six-month period of recent relevant tax returns, but HMRC can also include an amount equal to the value of the current arrears as part of the security amount.

For example, if you were 12 months behind on PAYE/NIC payments and HMRC calculated an amount for the future liability using a period of four months, they could request 16 months’ worth of PAYE/NIC amounts to be paid as a security.

Therefore, the amount requested can be substantial and the business or the director/s may be unable to make the payment.

What happens if you fail to provide security?

It’s a criminal offence if you do not provide the security in full. If you fail to provide security when required, HMRC can take you to court, and you can be fined you up to £5,000. In respect of VAT, if you continue to trade without paying the security, this fine can be levied for every taxable supply made while the security has not been paid.

Can you appeal a NOR?

Yes. This must be done within 30 days and grounds for the appeal must be provided. If HMRC accepts the grounds for appeal, it will then withdraw the NOR. If HMRC does not accept them, you can request an internal review (by a different HMRC officer), and/or appeal to the First Tier Tax Tribunal where a judge will consider whether the NOR should have been issued. One of the grounds for appeal can be that the amount demanded is excessive in the circumstances. Once such an appeal has been made, it may be possible to negotiate with HMRC to agree a reduced amount. One of the conditions for such an agreement is likely to be that a time to pay arrangement is agreed and complied with for the outstanding debt.

When will the security be repaid?

The security can be held by HMRC for between 12 and 24 months. However, HMRC may consider returning it at an earlier point if payments are being made on time and HMRC believes there is no longer a risk that payments will be missed. The security can then be set against any historical debts which are still outstanding.

How we can help

A NOR can come as a shock and HMRC is not always considerate of the difficulties a business may be facing. We can assist with appeals and negotiate time to pay arrangements and a reduced security amount. Ultimately engaging with HMRC in this way and seeking to reach a resolution will reduce the likelihood that criminal prosecution will commence. Our experts have extensive experience dealing with HMRC and have built up a strong and trustworthy reputation, allowing us to achieve the best outcomes for our clients.