Can a care agency keep trading after a PAYE security notice?
Yes. A PAYE security notice does not close your agency and does not stop you running payroll. You can keep paying your carers, keep invoicing councils and the ICB, and keep taking on new packages exactly as before. The notice, which HMRC calls a Notice of Requirement, is a demand for money held as protection, not an instruction to stop trading.
This is the point that catches owners out, because the letter reads far more severely than it works in practice. For some taxes, such as VAT, carrying on the activity without first giving the security is itself the offence. PAYE is different. HMRC confirms in its securities guidance on the consequences of not providing security that for PAYE and National Insurance the offence is simply failing to give the security it has required by the date set. You are not committing an offence by continuing to employ carers. You would be committing one by letting the deadline pass with nothing provided.
So the question is never really "can we keep trading". You can. The question is how you deal with the figure HMRC wants, which is where our care agency accountants spend their time when one of these notices lands. LOYALS is a King's Cross firm of accountants and business consultants that runs payroll and PAYE for care providers across London, and the framing below is what a finance lead actually has to decide once the notice is on the desk, not the theory.
Why did our care agency get a security notice?
HMRC asks for a security where it sees a real risk that your PAYE and National Insurance will go unpaid. It is forward looking, aimed at protecting the tax on wages you have not run yet, rather than a penalty for the past. For a care agency, three triggers come up again and again.
The first is a run of late or missed PAYE payments, which is common in domiciliary care where the cash from councils arrives weeks after the carers have already been paid. The second is a large and fast-growing payroll balance, because a security is sized on your payroll, so an agency that has doubled its carer numbers looks like more exposure to HMRC. The third, and the one that stings, is a director who was connected to an earlier business that closed owing PAYE. HMRC links the people, not just the company, so a new agency can inherit the suspicion from an old one. Our payroll and PAYE team sees the third trigger most often behind notices that feel like they came from nowhere.
How much security will HMRC ask for?
The figure is built to a formula, not plucked from the air, and once you see the shape of it the number stops being a mystery. HMRC sets out the calculation in its securities guidance on the quantum calculation for PAYE and NICs. For an agency that pays monthly, it takes one month of your PAYE and Class 1 National Insurance, adds three months more to cover the time it would take to wind the business up, then adds any PAYE you already owe at the date of the notice, plus any Class 1A National Insurance due for the year on benefits. In round terms that is about four months of your payroll taxes, plus your arrears.
For a busy agency that quickly becomes a large number. A domiciliary provider running forty or fifty carers can carry a monthly PAYE and National Insurance bill well into five figures, so a four month base lands in the tens of thousands before any arrears are added. The exact amount you cannot know in advance, because it depends on HMRC's own estimate of your monthly liability and on precisely what it treats as already owed. That figure is set out in the covering letter, the SEC3, that comes with the notice, and checking it against your own payroll records is the single most useful first move.
Picture an agency whose PAYE and National Insurance run at around 18,000 pounds a month, with 12,000 pounds of PAYE already behind. Its security works out near 84,000 pounds: 18,000 for the single month, 54,000 for the three month wind-up period, and 12,000 for the arrears, with a little Class 1A on top. Against perhaps 35,000 pounds the business could free up at short notice, you can see the problem at a glance. The demand is not unfair in how it is built, but it is large against the cash a care agency actually holds, because payroll goes out long before the council pays.
Here is the same demand set out line by line, the way we would reconcile it against your payroll before deciding how to respond. The figures are illustrative.
| Part of the security | What it is based on | Amount |
|---|---|---|
| One month's PAYE and NIC | Your most recent monthly liability | £18,000 |
| Three month wind-up cover | Tax at risk while a business closes | £54,000 |
| PAYE already owed | Arrears at the date of the notice | £12,000 |
| Security HMRC requires | £84,000 | |
| Cash the agency can spare now | Available without missing payroll | £35,000 |
| Gap to find or finance | £49,000 |
Illustration for a UK domiciliary care agency, not client data. Any Class 1A National Insurance for the year is added on top of the figures shown.
What is the deadline, and what happens if we miss it?
The notice names a date by which you must give the security, and by law that date can never be earlier than 30 days after you receive the notice, as HMRC explains in its guidance on the Notice of Requirement to give security. So you always have at least a month, and usually a little more, to act. That is enough time to check the figure, take advice and arrange funds or a bond. It is not enough time to let the letter sit in a drawer while you hope it goes away.
Missing the date is where a security notice stops being an inconvenience and becomes serious. Failing to give the required security is a criminal offence under section 684(4A) of the Income Tax (Earnings and Pensions) Act 2003, and the fine has no upper limit. On top of that, HMRC still chases the underlying PAYE debt through its normal routes, so ignoring the notice leaves you with both a prosecution risk and the original bill. This is why, in almost every case we see, the honest advice is the same: provide the security or appeal it, but never let the clock run out.
What are our options when the notice lands?
In practice there are three routes, and most agencies end up using a combination. You can provide the security, by cash deposit or an approved bond, and carry on. You can appeal, if you think the figure or the requirement itself is wrong. Or you can talk to HMRC about paying it over time or reducing it, particularly where arrears are the main driver. None of these is mutually exclusive, and the right mix depends on how solid HMRC's figure is and how much cash you can safely release.
Here is the position we take, and the condition that changes it. If the figure looks right and you can raise the cash or a bond, provide the security and keep trading rather than fight it, because an appeal rarely removes the requirement altogether and the unlimited fine for ignoring it is a far bigger threat than the cash being tied up for a while. The exception is where HMRC has plainly overstated the liability, counted a payment you have already made, or included arrears you have since cleared. There, you appeal inside the 31 days before you part with anything, because the figure is the thing most worth challenging. A cash deposit, by the way, is not lost money: it is held for the period stated in the notice and returned, or set against your account, once your PAYE is paid on time through that period.
Can we challenge the amount or the notice?
Yes, and the window is tight, so this is the decision to make first. You can appeal in writing within 31 days of the date the notice was given, setting out your grounds, as HMRC describes in its securities guidance on PAYE and NICs appeals and reviews. Alongside the appeal you can ask HMRC for a review of its decision, ask for the appeal to be heard by the independent tax tribunal, or both. If you have asked for time to pay first and been refused, the 31 days run from the date of that refusal instead.
An appeal is worth the effort where the number is wrong rather than merely unwelcome. Good grounds are a liability HMRC has overstated, a payment you made that has not been credited, arrears that were already cleared, or a wind-up assumption that does not fit a stable, growing agency. A general objection that the amount is large, or that paying it is hard, is not a ground that succeeds. The practical work is reconciling HMRC's figure against your own filed payroll and payment records, line by line, which is precisely the detail the separate guidance on the person's options after a notice, at SG42150, expects you to engage with when any PAYE debt is folded into the figure.
Here is how the usual ways of handling a security notice actually compare:
| What responding to the notice needs | Handle it yourself | Generic accountant | LOYALS specialist |
|---|---|---|---|
| Reconciles HMRC's figure to your payroll | ✗ Taken at face value | ● If asked | ✓ Line by line |
| Spots an overstated or double-counted amount | ✗ | ● | ✓ Checked before you pay |
| Protects the 31 day appeal window | ✗ Often missed | ● | ✓ Diarised day one |
| Models the cash impact on payroll | ✗ | ● Extra fees | ✓ Part of the job |
| Open Mon to Sat when the notice lands | ✗ | ✗ Mon to Fri 9 to 5 | ✓ 10am to 7pm Mon to Sat |
| Fixed monthly fee, no surprise invoices | ● Varies | ● Hourly billing common | ✓ Fixed monthly |
This is why care agencies hand a security notice to a specialist who checks the figure and the deadline, not just files it away.
What this typically costs at LOYALS
- Care Payroll and Compliance, including PAYE reconciliation and HMRC correspondence: from £995 a month
- Care Finance Department, with payroll, invoicing, credit control and monthly reporting: £1,495 to £2,495 a month
- One-off Structure and Tax Review, to check a security figure and your options: from £750, credited against your first month
All fees exclude VAT and are fixed for twelve months. Quotes are issued in writing within 24 hours after a 15-minute call, and we do not take on ongoing work below £500 a month. See full price list.
What this means for you: the first week after the notice
If a Notice of Requirement has just arrived, a short, calm sequence protects the agency far better than panic or silence.
- Note the two dates. The date to provide the security, which is at least 30 days out, and the 31 day appeal deadline. Put both in the diary before anything else.
- Reconcile the figure. Check HMRC's amount against your filed payroll and your actual payments. This is where overstatements and uncredited payments show up.
- Decide the route. Provide the security if the figure is right, appeal if it is wrong, or open a time to pay conversation if arrears are the driver and cash is tight.
- Keep paying carers and PAYE on time. Clean payment behaviour from here strengthens any appeal and brings the deposit back sooner.
- Get specialist eyes on it quickly. The 31 days go fast, and the figure is the thing most worth checking before you pay or appeal.
Handled properly, a security notice is a cash and timing problem you can manage, not the end of the agency. LOYALS is a King's Cross firm of accountants and business consultants that runs payroll and PAYE for domiciliary care providers across London, and we would far rather reconcile the figure and protect your appeal window with you in the first week than explain afterwards why a missed deadline turned a demand into a prosecution.
Care agencies carry payroll, funding and compliance pressures that a general accountant rarely sees from the inside. If you want the wider picture of how we support providers like yours, our care agency accountants page sets out the full finance function, from carer payroll and council invoicing to HMRC correspondence and lender reporting.