Understanding Irrevocable Powers of Attorney as Security Under UK Law

Irrevocable Powers of Attorney Given as Security

HMRC uses this term for a power of attorney that is part of a finance or security arrangement, not just a routine authority to act. If the document is given to protect the attorney’s own secured interest and is expressed to be irrevocable, or only revocable with the attorney’s consent, HMRC treats it as a section 4 power under the Powers of Attorney Act 1971.

• An ordinary power of attorney is usually revocable, but one given as security is intended to protect the attorney’s own interest.
• HMRC looks at the substance of the document, not just its title or whether it uses exact standard wording.
• Key signs are that it secures obligations owed by the donor to the attorney and says it is given by way of security.
• It is commonly found in loan, charge, debenture, security assignment, and wider finance documents.
• The practical effect is that the donor is not meant to withdraw the authority in the normal way while the secured interest continues.
• HMRC’s guidance is interpretative rather than a direct tax charging rule, so the exact drafting and wider transaction still matter.

Scroll down for the full analysis.

Irrevocable powers of attorney given as security: what HMRC is referring to

This page explains a narrow but important point about powers of attorney in a property or finance context. HMRC is describing a power of attorney that is granted as security for someone else’s interest, and which is said to be irrevocable. The practical significance is that the document is not just an ordinary authority to act. It is part of a security arrangement and is intended to protect the attorney’s position.

What this rule is about

A power of attorney normally allows one person, the attorney, to act on behalf of another, the donor. In many situations, the donor can revoke that authority.

The source material deals with a different type of arrangement. Sometimes a power of attorney is granted to support a secured obligation. In that setting, the attorney is not simply acting as a convenient representative. The attorney has its own interest to protect, usually because obligations are owed to it under a finance or security arrangement.

That is why the source refers to a power of attorney being “given as security for an interest of the attorney”. The point is that the attorney’s authority is tied to its secured position.

What the official source says

HMRC says that a power of attorney may be given as security for an interest of the attorney. Where such a power is described as irrevocable, meaning it cannot be withdrawn by the donor, HMRC says it is made under section 4 of the Powers of Attorney Act 1971.

The source gives an example of wording along these lines:

“This power of attorney shall be irrevocable save with the consent of [the Donee] and is given by way of security to secure the performance of obligations owed by the Donor to the Donee under [name of agreement].”

HMRC also makes clear that the document does not need to use exactly those words. Different wording can still have the same effect if it shows that the power is granted by way of security.

What this means in practice

The practical point is that you should not look only at the label “power of attorney”. You need to ask what function the document is serving.

If the power is part of a security package, and is intended to secure obligations owed to the attorney, HMRC treats this as a section 4 power under the Powers of Attorney Act 1971 where it is expressed to be irrevocable. That matters because the donor is not intended to be free to withdraw the authority in the ordinary way while the secured interest remains in place.

In property transactions, this kind of power may appear alongside loan documents, charges, security assignments, or wider contractual arrangements. It is often there so that the attorney can take steps needed to protect or enforce its position if the donor does not do so.

For stamp tax analysis, the source itself does not set out a charging rule or tax consequence. Its function is interpretative. It helps identify what sort of legal instrument HMRC considers it is looking at when a power of attorney is granted as security and expressed to be irrevocable.

How to analyse it

When reviewing a document, the sensible questions are:

• Is the power of attorney connected to obligations owed by the donor to the attorney?
• Does the document say, in terms or in substance, that it is given by way of security?
• Is it expressed to be irrevocable, or revocable only with the attorney’s consent?
• What underlying agreement is it securing, such as a loan agreement, debenture, charge, or other contractual obligation?
• Does the wording show that the attorney has its own interest to protect, rather than merely acting as an agent for convenience?

The wording does not have to match HMRC’s example exactly. The real issue is substance. If the document is intended to secure performance of obligations owed to the attorney, that points strongly towards a power given as security.

It is also important to distinguish between:

• an ordinary power of attorney, which is mainly about representation and authority to act; and
• a power of attorney given as security, which is part of a creditor or secured party protection mechanism.

Example

Illustration: A borrower enters into a finance agreement and grants the lender a power of attorney. The document states that the power is given by way of security for the borrower’s obligations under the loan agreement and may not be revoked without the lender’s consent. On the approach described by HMRC, this is the kind of power of attorney treated as made under section 4 of the Powers of Attorney Act 1971.

Why this can be difficult in practice

The main difficulty is that documents do not always use standard wording. Some instruments clearly say they are “irrevocable” and “given by way of security”. Others are less direct.

That means the analysis can become fact-sensitive. A document may be called a power of attorney, but the legal effect depends on what it actually does and how it fits into the wider transaction. The surrounding agreement may be essential to understanding whether the attorney truly has an interest being protected.

Another practical difficulty is that HMRC’s manual is explaining its view of the legal character of the instrument, not setting out the full law of powers of attorney. The legislation remains the primary source. So if the drafting is unusual, the answer may depend on the exact terms of the document and the secured arrangement it supports.

Key takeaways

• An irrevocable power of attorney given by way of security is not just an ordinary agency document.
• HMRC treats this type of instrument as falling under section 4 of the Powers of Attorney Act 1971.
• The key question is substance: whether the power secures obligations owed by the donor to the attorney.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding Irrevocable Powers of Attorney as Security Under UK Law

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