New powers to tackle PAYE dodgers

From April 2012, HMR&C will be able to request that employers pay a security, where there is significant risk that they will not pay over their PAYE tax deductions or NICs.

The necessary security will tend to be either a cash deposit from the business or director, or a bond from an approved financial institution that is payable on demand. HMR&C will calculate this amount of security on a case-by-case basis, depending on the amount of tax at risk, the employer’s previous behaviour and other factors.

This latest power, an expansion of a power that has already been successfully used for VAT, insurance premium tax and environmental taxes, will be aimed at employers who deduct money from employees’ pay packets, under the pretext of paying their employees’ income tax and NICs, but have no intention of forwarding it to HMR&C. These employers often build up extensive PAYE and NICs debts, and ignore HMR&C’s attempts to contact them. In many cases, the business becomes insolvent, to avoid tax, and sets up a new company soon after, to continue trading.

Businesses that fail to provide a security face a fine of up to £5,000, which will be enforceable by the courts.

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