This spring HMRC will get new powers that will allow it to demand a cash deposit or bond as security from companies who it believes are trying to dodge their pay as you earn (PAYE) or national insurance (NIC) obligations. Kim Jackson a Director at HSJ Accountants explains these new powers.
From 6 April 2012, HMRC can ask employers to pay a ‘security’ – a cash deposit or a bond from an approved financial institution – where they believe there is a risk the employer will not meet their tax obligations and pay the PAYE or NIC contributions that are due.
HMRC will target employers that deduct money from employees’ pay packets, under the pretext of paying employees’ income tax and NICs, but have no intention of paying it to HMRC. “These employers often build up substantial PAYE and NICs debts, and ignore attempts to contact them,” HMRC said in a statement. “In many cases, the business becomes insolvent to avoid tax and sets up a new company soon after, to continue trading.”
These new powers are an extension of a power that HMRC has already successfully used for collecting VAT, insurance premium tax and environmental taxes.
The amount of security required will be calculated on a case-by-case basis, depending on the amount of tax at risk, the employer’s previous behaviour and other risks. Companies that fail to provide a security face a fine of up to £5,000, which will be enforceable by the courts.
If HMRC deems you are an at risk employer how will you manage to pay this security in advance, and how will this affect your cashflow?
Please call me on 0845 365100 or email me and get some advice on these issues and cashflow planning.