Judgment summary
This appeal concerned Notices of Requirement (NORs) issued by HMRC on 13 June 2025 requiring Precision Fabrications Andover Ltd and its two directors, jointly and severally, to provide security of £150,109.12, comprising £68,351.04 PAYE and £81,758.08 NICs (2).
The NORs were issued under Part 4A of the PAYE Regulations and Part 3B of Schedule 4 to the NICs Regulations following a history of repeated late and incomplete payment of PAYE and NIC liabilities, previous warning letters, Time to Pay arrangements, and the withdrawal of an earlier Notice of Requirement in February 2025 (4, 40).
The Appellants argued that the Company's payment difficulties stemmed from exceptional cashflow pressures, principally the insolvency of a major customer causing a loss of approximately £160,000, slower-paying replacement customers, bad debts, and consequential difficulties with invoice factoring (5, 28-30).
The Tribunal considered its jurisdiction to be mixed: supervisory as to whether security was necessary for the protection of the revenue, but appellate as to the requirements specified in the notice, such as amount, manner, timing and duration, by virtue of the express power in Reg 97V(5) to vary the requirements in the notice (25-26).
Applying that approach, the Tribunal found that HMRC's decision that security was necessary was reasonably open to it given the compliance history, and declined to vary the substantive requirements of the NORs given the Company's indebtedness had increased to £443,403.99 by the hearing date (56, 58). The Tribunal did, however, extend the time for providing security to 60 days from the date of the decision under Reg 97V(7)(a) (63-64).
Background
The Company accrued substantial PAYE and NIC liabilities during 2023 which were not paid in full by the due dates. HMRC issued warning letters on 27 September 2023 and 29 November 2023, recording outstanding liabilities rising to £195,253.53 by the later date (35-36).
Time to Pay arrangements were agreed and monitored through 2024. A further warning letter was issued on 27 September 2024, followed by substantial payments clearing certain earlier liabilities (37-39).
On 2 January 2025 HMRC authorised a Notice of Requirement, which was withdrawn on 4 February 2025 after the Company paid approximately £55,000 and made representations about securing future compliance. HMRC warned it would continue to monitor the position and might issue a further security notice if liabilities were not paid on time (40).
On 13 June 2025 HMRC issued the NORs under appeal, calculated by reference to a four-month estimated PAYE liability of £49,219.00, a four-month estimated NIC liability of £57,754.00, PAYE arrears of £19,132.04, and NIC arrears of £24,004.08 (41-42). The Appellants appealed on 25 June 2025, HMRC upheld the NORs on review dated 19 September 2025, and the appeal was notified to the Tribunal on 15 October 2025 (3, 45).
Core dispute
The core dispute was whether HMRC's decision that security was necessary for the protection of the revenue, under Reg 97N of the PAYE Regulations and the corresponding NICs Regulations provision, fell within the range of reasonable decisions open to HMRC on 13 June 2025 (48).
A related and significant issue concerned the nature of the Tribunal's jurisdiction under Reg 97V(5), namely whether it was purely supervisory (as HMRC contended, relying on VAT security authorities such as John Dee) or whether it extended to an appellate function permitting the Tribunal to substitute its own view on matters specified in the notice, including amount, manner, timing and duration of security (14-26).
The Appellants contended that the Company's payment difficulties were temporary, caused by exceptional cashflow pressures following a customer's insolvency, and that HMRC ought to have allowed further time rather than requiring security (32).
Court findings
The Tribunal held that its jurisdiction under Reg 97V(5) of the PAYE Regulations is mixed in nature: supervisory as to whether security is necessary for the protection of the revenue under Reg 97N, but appellate as to the requirements specified in the notice, given the express statutory power to vary those requirements (25).
The Tribunal distinguished the VAT security case law relied upon by HMRC (including John Dee and Peachtree) on the basis that the VAT regime contains no equivalent to Reg 97V(5), and noted that HMRC was unable to explain how a purely supervisory jurisdiction could be reconciled with that express power to vary (23-24).
On the supervisory question, the Tribunal found that HMRC had ample material before it on 13 June 2025, including a lengthy history of arrears, multiple warning letters, repeated Time to Pay arrangements, and the withdrawal of an earlier Notice of Requirement in February 2025 followed by further liabilities accruing. HMRC's decision that security was necessary was therefore reasonably open to it (51-56).
On the appellate aspect, the Appellants did not advance any specific challenge to the amount, period, manner or persons required to provide security, and the post-NOR evidence, showing indebtedness rising to £443,403.99 by the hearing date, provided no basis to vary those requirements (58).
The Tribunal further held that Reg 97V(7)(a) confers an express power to determine an alternative date for compliance following determination of an appeal, independent of whether the NOR itself is varied or set aside (62).
Outcome
The appeal was dismissed and the NORs were confirmed in full as to the amount, manner, duration and persons required to provide security (59, 64).
Pursuant to Reg 97V(7)(a), the Tribunal determined that the security required by the NORs should be provided within 60 days of the date of the decision, rather than the standard 30-day period, a variation which HMRC did not oppose (61, 63-64).
Major issues / areas of contention
- Whether HMRC's decision that security was necessary for the protection of the revenue under Reg 97N of the PAYE Regulations fell within the range of reasonable decisions open to it.
- The nature and scope of the Tribunal's jurisdiction under Reg 97V(5), namely whether it is purely supervisory (as in VAT security cases) or has an appellate component permitting variation of the requirements in the notice.
- Whether the Company's cashflow difficulties, caused by a major customer's insolvency and slow-paying replacement customers, provided grounds to set aside or vary the NORs.
- Whether the Tribunal could exercise a power under Reg 97V(7)(a) to determine an alternative date for compliance with the security requirement.