Security ― when is it required for VAT / environmental tax credits?

By Tolley
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The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Security ― when is it required for VAT / environmental tax credits?
  • What is a VAT credit?
  • When is security required?
  • Acceptable forms of security
  • Security ― other considerations
  • Repayment supplement
  • Default surcharge
  • Right of appeal

This guidance note provides an overview of when HMRC is entitled to request that a taxpayer provides security in respect of a VAT or environmental tax credit.

More information on HMRC’s powers can be found in the HMRC powers ― Part I and HMRC powers ― Part II guidance notes.

Businesses can be required to give HMRC security for other VAT and indirect tax matters which are not covered in this note, including:

  • security for risk of VAT being unpaid
  • landfill tax
  • aggregates levy
  • climate change levy
  • insurance premium tax

SG23000

What is a VAT credit?

The term VAT credit is defined in s 25(3) which states the following:

‘Payment by reference to accounting periods and credit for input tax against output tax

(3) If either no output tax is due at the end of the period, or the amount of the credit exceeds that of the output tax then, subject to subsections (4) and (5) below, the amount of the credit or, as the case may be, the amount of the excess shall be paid to the taxable person by the Commissioners; and an amount which is due under this subsection is referred to in this Act as a “VAT credit”.”

Paragraph 4(1A) of Schedule 11 does not therefore apply to any other kind of “repayment” such as a repayment claim under section 80 of the VAT Act (credit for, or repayment of, overstated or overpaid VAT), or a repayment claim under Part XX of the Value Added Tax Regulations 1995 (repayments to Community traders).

Paragraph 4(1A) of Schedule 11 does not apply where an interim payment is requested following the decision that there is no entitlement to a VAT credit.’

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