Security for VAT due
HMRC may require a taxable person to give security (or further security) of such amount as they may determine for the payment of any VAT1 which is, or may become, due2. This has been described as a 'draconian provision' which can effectively put a trader out of business3.
HMRC states that 'HMRC may ask for a deposit or bond if they think there's a risk you won't pay your tax or duty on time. They call this a security. If you don't pay your bill HMRC can use the security to settle it. HMRC won't accept property or other high-value items as a deposit.'4
With effect from 10 April 2003, HMRC's powers were significantly extended5 in order 'to tackle serious cases of VAT evasion where several businesses act together to attack the tax system6'. HMRC may require a taxable person, as a condition of his supplying or being supplied with goods or services under a taxable supply, to give security (or further security) for the payment of any VAT that is or may become due from him, or from any person by or to whom those goods or services are supplied7. This power is without prejudice to HMRC's powers to require security under VATA 1994, s 48(7) (failure to appoint a VAT representative – see V2.1158). The extension of HMRC's powers in this way (and also to impose joint and several liability in certain cases – see V3.502) was challenged in Federation of Technological