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Government will no longer tolerate PAYE and NICs debt

Government will no longer tolerate PAYE and NICs debt

Employers may be required to lodge security against PAYE and national insurance payments under proposals laid out in the Finance Bill 2011 and failure to comply will be a criminal offence.

HMRC has estimated that the Treasury lost between £600m and £800m in each of the years from 2005 – 06 and 2008 – 09 due to employers going bust and not handing over the employers national insurance contributions already deducted from their employees’ salaries.

The new proposals mirror those already in place for VAT and a partner from PwC said he hoped the power to prosecute would rarely be used and even then only if the circumstances were appropriate.

Over 150 million pounds worth of VAT was protected by securities in the year 2009 – 10. This total included sums that would have been paid late or after recovery action had been taken.

It is thought that PAYE of a similar value could be subjected to a security requirement leading to around £5 million yield which would not otherwise have been paid.

Tax experts claim that these new measures were prompted by a recent surge in recovery actions against football clubs such as Cardiff City, Notts County and Portsmouth. All three clubs have been served with winding up orders this year following their failure to settle outstanding tax debts.

The new policy will target the minority of employers who break the rules and make the system fair for all businesses, commented a Revenue spokesperson.

Alistair Darling first proposed the security measure in his final Budget earlier this year. A consultation on the issue has now been launched and will run until next February.

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Image: Debt by Strevo

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