Employers who deliberately attempt to dodge their PAYE or National Insurance contributions (NICs) may land themselves in hot water when new HMRC powers come into force this spring.
As of 6 April 2012, HMRC will be given the power to force employers to pay a security deposit if there is a serious risk that PAYE deductions will not be handed over to the taxman.
The new legislation will not affect employers with genuine financial problems but instead target employers who deduct income tax and NICs from employees’ pay packets with no intention of paying it to HMRC. It has detailed instances of companies allowing PAYE and NICs debts build to up before claiming insolvency – thus avoiding tax- and then setting up a new ‘phoenix’ company.
A security in the form of a cash deposit will now be required, either from the business or director, or via an approved bond that is payable on demand should anything go awry. The deposit amount will be decided on an individual basis depending on tax risks and the employer’s history of tax behaviour. Those who fail to provide a security face a fine of up to £5,000.
HMRC already uses the security model for VAT, insurance premium tax (IPT) and environmental taxes and says: “They are affective – in around half the cases the trader becomes and remains compliant after receiving the first warning letter.”
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