Legislation at section 85 of Finance Act 2011 provides HM Revenue & Customs (HMRC) with a power to make secondary legislation to require a security where they identify a risk that the employer may not pay over the PAYE and National Insurance contributions (NICs) that they deduct from their employees. It introduces a criminal offence for failure to provide a security when required to do so.
Secondary legislation will allow HMRC from 6 April 2012 to ask employers to pay a financial security where there is serious risk that they won’t pay over their PAYE deductions or Class 1 NICs.
Powers to prevent deliberate non-payment of PAYE
A facility to require a security already existed for some indirect taxes, but it was most commonly used for VAT, where there is also a criminal sanction for trading without providing a security where one is required.
Through consultation the Review examined the extension of the VAT and other indirect tax power to PAYE and NICs. Those struggling businesses, who were using Time to Pay arrangements were excluded from the scope of the work. The proposals did not extend to a requirement for security beyond PAYE and NICs.
A consultation document, with draft Finance Bill clauses, together with draft regulations, were published for consultation on 9 December 2010. No changes were made to the primary legislation. However, the regulations will be amended, taking account of comments received, in particular, to ensure that taxpayers are aware of Time to Pay arrangements before a security is enforced. A response document was published on 31 March 2011.
Security for PAYE and NICs - Summary of responses March 2011
Security for PAYE and NICs - Consultation Document December 2010
Security for PAYE and NICs - Tax Information and Impact Note December 2010
