HMRC can ask problem employers for a security
From 6 April 2012 HMRC will be able to ask employers to pay a security where there is serious risk that they won’t pay over their PAYE tax deductions or Class 1 National Insurance contributions (NICs).
This is an extension of a power that has already been used for VAT, insurance premium tax and environmental taxes and is not aimed at employers who have genuine payment difficulties. It is aimed at employers who deliberately try to defraud the government. In HMRC’s terms,
‘These employers:
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deliberately choose not to pay
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engage in phoenixism - this is where a business evades tax by becoming insolvent and then sets up a new company the next day to continue trading
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have no qualms about building up large PAYE or NICs debts, including penalties
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do not respond to HMRC’s attempts to contact them.’
The required security will usually be either a cash deposit from the business or director - held by HMRC or paid into a joint HMRC/taxpayer bank account - or a bond from an approved financial institution which is payable on demand.
Businesses that fail to provide a security face a fine of up to £5,000, which will be enforceable by the courts.