If HMRC believes an employer may be at risk of not paying income tax and Class 1 National Insurance Contributions collected through PAYE, it can request a security from the business. This has been in effect since 6th April 2012, and was introduced following the success of the same regime applied to VAT, environmental taxes and Insurance Premium Tax. According to HMRC, more than half of the employers who have had a security requested become compliant, and it is hoped that the same strategy will be effective for PAYE.
Who will be affected by the security legislation?
Although most employers remain compliant with HMRC, a small minority make deliberate attempts to evade tax. These are the businesses thatwill be affected by the PAYE security measures. The businesses likely to be asked to pay a security include those which deliberately liquidate one business only to open a new company the next day, deliberate non-payers, companies that refuse to co-operate, and those that accumulate large arrears of PAYE taxes and penalties. Those businesses experiencing genuine difficulties that have contacted HMRC won’t be affected by the securities.
The security will be requested as a cash payment from the business, partner or director. The security will usually be held by HMRC, although it is sometimes held in an account in the joint names of HMRC and the company.
Who is liable to pay the PAYE security?
HMRC will issue the request for a PAYE security to the company and each of its directors, as they have joint responsibility for payment. When HMRC identifies a business with a large PAYE and NIC debt, a letter is issued to the company and each director warning them that if the arrears remain unpaid, a security may be requested against future debts. Employers have 14 days to contact HMRC, either to settle the outstanding arrears or to discuss them. If HMRC is not satisfied with the response from the company, a request for a security will be issued.
What if the employer disagrees with the decision?
If an employer disagrees with the request for a security, they have the right to request that an independent officer from HMRC review the case. At this point the security may be revoked, upheld or varied by the reviewing officer. If the employer is not satisfied, they can appeal to the tribunal. For further information, professional guidance should be sought.
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