HM Revenue & Customs will require employers to pay a security from April if it believes that there is serious risk they will fail to pay the requisite PAYE tax deductions or National Insurance Contributions on behalf of employees.
The powers are an extension of an initiative that has already been successfully used to ensure the payment of VAT, insurance premium tax and environmental taxes.
If employers fail to pay the security, they will be punished with a fine of up to £5,000 and the action will be enforced through the courts.
The business or a director will be responsible for paying the securities as cash deposits or bonds from an approved financial institution that is payable on demand. They will be calculated on a case-by-case basis depending on the employer’s previous behaviour, the amount of tax owed and other risks.
HMRC intends to target employers that deduct money from employees’ pay packets under the pretext of paying their income tax and NICs, but have no intention of paying the money to it in turn. It will use the securities to tackle the handful of employers that deliberately try to defraud the government. These employers are defined as those that:
- deliberately choose not to pay
- engage in phoenixism
- have no qualms about building up large PAYE or NICs debts, including penalties
- do not respond to HMRC’s attempts to contact them.
The move will not affect employers that have genuine payment difficulties, however. They have been advised to read the HMRC guide ‘Problems paying HMRC‘, which provides guidelines on possible action as well as contact details for the
HMRC’s Business Payment Support Service
.
