From 6th April 2012, HMRC can ask employers to make a deposit on account of PAYE payments which they will hold against failure to pay. They will do this where they consider there is a serious risk that employers will not pay PAYE deductions and Class 1 National Insurance contributions. The Revenue takes the view that those business who do not meet their tax obligations gain an unfair advantage over those businesses which do comply. The Revenue will pursue those who do not pay to make tax fairer for all. It is no secret that the Revenue have lost (and continue to lose) an inordinate amount of money which has been deducted from employees but not handed over before Companies have entered insolvency.
The required security will be assessed by the Revenue on a case by case basis and will usually be required in cash from the Company or a Director personally. There are also arrangements that can be made for the provision of a bond or other security so long as such bond or security is payable on demand.
The Revenue states "we will use securities to tackle the handful of employers that deliberately try to defraud the government" by:
- Deliberately choosing not to pay
- Evade tax by becoming insolvent and then set up a new company (phoenixism)
- Build up large PAYE and NI Debts including penalties
- Do not respond to approaches from HMRC.
It does appear that HMRC are putting those who have suffered from the effects of the recession in a disadvantaged position but the good news is that you can ask for a review. If, you were previously a director of a company which failed to pay its tax bills and that failure was outside of your control then you can ask for the decision to be reviewed. If the Revenue will not reconsider, then you have to take your appeal to a tax tribunal. If you need to appeal then the Revenue provide helpful guidelines at http://tinyurl.com/cour3wa.
If you have any questions about the content of this article, then please contact me at martinh@cleggssolicitors.com.
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