Finance Bill 2011 proposals target PAYE dodgers
The government has published draft legislation of its Finance Bill 2011 including new proposals to tighten up on PAYE and NIC payments.
Under the new powers, HMRC will be able to ask employers for a security on PAYE payments that are considered ‘seriously at risk’.
Non-payment of a security will be a criminal offence, and once the new powers are in place HMRC will be able to make an equivalent provision for national insurance contributions.
This will be similar to the provision currently made for VAT payments. In the year to March 2010 the value of VAT protected by securities was over £150 million. This includes sums that would otherwise have been paid late or paid following recovery action by HMRC. It is anticipated that a similar value of PAYE could be protected by a security requirement, which would lead to a yield of £5 million per year which could not have been recovered by any other methods.
Tax experts say the new measures were prompted by the recent surge in recovery actions by HMRC against football clubs, many of whom have a habit of sitting on their PAYE and NIC payments. Portsmouth, Notts County and Cardiff City were all served with winding up orders at the start of the year following unpaid tax debts. (The courts later found in favour of Portsmouth against HMRC’s challenge to its company voluntary agreement).
The new rules were originally put forward in the June Budget, but HMRC said at the time that it wanted to wait until after the election to implement them.
“Employers who have no intention of paying amounts deducted from employees to HMRC have a substantial financial and business advantage over those employers who do pay. HMRC want to tackle this unfair advantage more effectively.
“This policy would target the minority of rule breakers and others who pose the most serious risks,” said the department.
"It's understandable why HMRC feels the need to impose securities on some employers, and one could argue that many feel it is unfair when the minority get away with non compliance of their employer duties," said Karen Thomson, associate director of policy, research and strategic visibility at the Institute of Payroll Professionals.
"Although some feel this is aimed at football clubs I think it is important to note that not all clubs withhold monies and many do comply. There are often complications surrounding the tax and National Insurance of football players, particularly when large bonuses might be paid. The IPP would encourage HMRC to be fair and consistent in its approach without discrimination. It is also important that in these difficult economic times that empathy is given to those businesses, especially small businesses who need help not further demands," she added.
Subject to consultation responses, the new rules will come into effect from 6 April 2012.
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