UK Construction and Law

A fabricator and its two directors must find 150,109 pounds of PAYE security after a customer failed

By Staff Writer  |  2 September 2026

A customer's liquidation cost the company about 160,000 pounds and its cashflow never recovered. The tribunal confirmed the security notices, and settled how far it can go behind them.

On 13 June 2025 HM Revenue and Customs issued notices of requirement to Precision Fabrications Andover Ltd and to its two directors, Jonathan Lees and Caroline Lees, under Part 4A of the Income Tax (Pay As You Earn) Regulations 2003 and Part 3B of Schedule 4 to the Social Security (Contributions) Regulations 2001. The three were made jointly and severally liable to give 150,109.12 pounds of security by 23 July 2025, made up of 68,351.04 pounds for PAYE and 81,758.08 pounds for National Insurance, to be held for 24 months.

The build up matters, because it shows what a security demand actually is. It was calculated as a four month estimated PAYE liability of 49,219 pounds and a four month estimated National Insurance liability of 57,754 pounds, plus arrears of 19,132.04 pounds and 24,004.08 pounds. In other words, a third of a year of payroll taxes paid up front on top of the debt.

A cashflow story the tribunal accepted and then set aside

The company's case was that a customer of size had gone into liquidation, costing it about 160,000 pounds; that the customers who replaced it worked to lower credit limits and paid more slowly; that some of those replacement debts proved irrecoverable; that all of this narrowed what its invoice factoring provider would advance; and that a research and development tax relief repayment was expected which would reduce the arrears.

In Precision Fabrications Andover Ltd and others v The Commissioners for HMRC [2026] UKFTT 1255 (TC), released on 28 August 2026, the tribunal accepted every part of that account. It then held that none of it decided the appeal.

The question is not whether the Company had an explanation for its payment difficulties, nor whether the Company remained a viable business. The question is whether HMRC could reasonably regard the provision of security as necessary for the protection of the revenue.

Tribunal Judge Stapenhurst and Ms Ann Christian

The history answered that question. Warning letters had gone out in September 2023, November 2023 and September 2024. Time to pay arrangements had been agreed more than once. An earlier notice of requirement, authorised on 2 January 2025, had been withdrawn on 4 February 2025 after the company paid about 55,000 pounds and said it had taken steps to keep up. Further arrears then accrued before June. The tribunal put the point squarely against the company: the very circumstances relied on to explain the arrears also showed a continuing weakness in cashflow, and so a continuing risk that the next payment would not be made either.

By the date of the hearing the company's PAYE and National Insurance debt stood at 443,403.99 pounds including interest and penalties, against 150,109.12 pounds of security demanded fourteen months earlier.

The point of law the decision settles

The tribunal also resolved a question left open by the Upper Tribunal in 2023. HM Revenue and Customs argued that the jurisdiction is supervisory only, as it is for VAT security, so that the tribunal can ask no more than whether the decision was reasonable. The tribunal invited it to explain how that could stand with the express power in the regulations to vary the requirements in the notice, and recorded that no explanation was offered.

Its conclusion is that the jurisdiction is mixed. Whether security is necessary for the protection of the revenue is supervisory, judged on the material available to the officer on the day. The requirements in the notice, meaning the amount, the manner, the date and the period, are appellate, and on those the tribunal may form its own view and take account of everything before it, including events since the notice was issued. Here that cut against the appellants, because the debt had grown.

The appeal was dismissed and the notices confirmed, with one concession: the tribunal used its express power to fix a different compliance date and gave 60 days from the decision rather than 30. Failing to give security when required is a strict liability offence carrying a fine of up to level 5 on the standard scale, which is why the extra month is worth having.

For any subcontractor carrying a bad debt from a failed customer, the sequence in this case is the one to watch. The arrears arrive first, the time to pay arrangement second, the withdrawn notice third, and the demand for a third of a year of payroll taxes from the directors personally fourth.