Case: HMRC’s PAYE and NIC security requirements were reasonable

Released 9 August 2018

[2018] UKFTT 0411 (TC)

Judge Philip Gillett

Decision released 23 July 2018

Pay as you earn – HMRC decision to require security for PAYE and NIC liabilities – Whether or not decision reasonable – Held yes – Appeal dismissed – Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682), Pt. 4A, Social Security (Contributions) Regulations 2001 (SI 2001/1004), Sch. 4, Pt. 3B.

Boship Lions Farm Hotel Ltd & Ors [2018] TC 06613


Mr Gulzar was the sole director and 100% shareholder of Boship Lions Farm Hotel Ltd, Mansion Lions Hotel Ltd and Albany Lions Hotel Ltd (together, the appellants). Each of the appellant companies appealed against notices issued by HMRC requiring them to give security for PAYE and NIC liabilities in accordance with SI 2003/2682, Pt. 4A and SI 2001/1004, Sch. 4, Pt. 3B. Mr Gulzar appealed against notices given to him, relating to the three companies in his personal capacity.

HMRC issued the notices of security requirement because:

the appellant companies had each taken over the business of another business in the ownership or control of Mr Gulzar; and

at the time, all the predecessor businesses (and others in the ownership or under the control or influence of Mr Gulzar) either owed HMRC PAYE and NIC, VAT or had become insolvent with PAYE and NIC debts.

The security was calculated as four months average PAYE and NIC payments for the respective predecessor business.

The FTT noted that it could only interfere with HMRC’s decision if it believed that HMRC had taken into account irrelevant information, ignored relevant information, or reached a conclusion that no reasonable officer, if properly directed, could have reached on the facts before them.

The FTT considered that the amount of the security requested was in accordance with HMRC’s normal practice and was reasonable.

The FTT found no reason to interfere with HMRC’s decision:

(1)While the appellants may have paid off some of the debts between the date of the security notices being issued and the appeal hearing these cannot be taken into account as the FTT could only consider the facts as they were at the time the decision was taken.

(2)It did not matter that the companies required to provide security were not actually in arrears to HMRC, because of the broad power provided by the security rules.

(3)Although the appellants were being unfairly treated compared to other new businesses this was because of the director’s personal history of controlling businesses which had built up large debts owing to HMRC.

The FTT accordingly dismissed the appeal.


The three companies involved in this appeal had been newly formed by a sole director-shareholder who had built up tax debts of over £640,000 in other businesses. Understandably HMRC wanted to get some money upfront from the new businesses and therefore issued notices requiring security for PAYE and NIC. The FTT found HMRC’s course of action to be reasonable.

For commentary on when HMRC can require security for payment of PAYE and Class 1 and 1A NIC, see the Direct Tax Reporter at ¶183-755.

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