S.85 of the Finance Act 2011 introduced amendments to s.684 of the Income Tax (Earnings & Pensions) Act 2003 as follows:
“4B Provision that in specified circumstances a person may be required to give security, or further security, for the payment of amounts in respect of which the person is or may be accountable to the Commissioners under the regulations”.
“(4A) A person who fails to comply with a requirement imposed under PAYE regulations to give security, or further security, for the payment of any amount commits an offence if the failure continues for such period as is specified; and a person guilty of an offence under this subsection is liable on summary conviction to a fine not exceeding level 5 on the standard scale”.
The implication on the employers of this amendment is that from 6 April 2012 HMRC can ask employers to pay a security where there is a serious risk that the employers won’t pay their PAYE tax and/or NIC deductions over to HMRC. Already there are provisions in place where HMRC could ask for security in the case of VAT, insurance premium tax and environmental taxes. The security will either be a cash deposit from the business or director held by HMRC or paid into a joint HMRC/taxpayer bank account, or a bond from an approved financial institution payable on demand. The security is a measure to check employers who defraud the government by deliberately choosing not to pay the deductions. Typically, such employers after accumulating the PAYE liabilities become insolvent and start trading again under a new name (phoenixism). Whether to insist on a security will depend on the amount of tax at risk, the previous behaviour of the employer and other risks and will be done on a case by case basis. As with other decisions of HMRC employers can appeal against a decision of HMRC. Failure to pay the security may invoke further sanctions that include fines.
