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Security for payment of PAYE: reminder

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HMRC has reminded employers that from April 2012 it will have the power to require an employer to pay a security where there is a ‘serious risk’ of non-payment of PAYE tax or NICs.

‘The new power will be targeted 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 paying it to HMRC,’ the department said. ‘These employers often build up substantial PAYE and NICs debts, and ignore HMRC’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 (known as a “phoenix company”).’

The power has already been used for VAT and other taxes. It was extended to PAYE by FA 2011, s 85, which amends ITEPA 2003 s 684, after consultation.

Businesses failing to provide a security face a fine of up to £5,000. Guidance is provided on the HMRC website.