HMRC to demand collateral from NI cheats

Her Majesty’s Revenue and Customs (HMRC) will be given new powers in the spring to tackle employers who try to dodge paying their PAYE or National Insurance contributions (NICs).

They will allow HMRC to force employers to pay a security if the Revenue believes there is a serious risk the employer will not pay their PAYE deductions or NICs.

Failure to pay the security will be punishable with a fine of up to £5,00, enforced through the courts.

HMRC's new authority is designed to target employers who deduct money from their employees' pay packets for income tax and NICs, but then keep the money for themselves.

Often, these employers build up PAYE and NIC debts, ignoring HMRC attempt to recover the money.

HMRC said these employers often declare their business insolvent to avoid ever paying the tax, before setting up a new phoenix company to continue trading.

The power to demand a security for PAYE and NIC is similar to HMRC's existing authority to require collateral for VAT, insurance premium tax and environmental taxes from customers.

The Revenue said the new system would not affect employers with "genuine payment difficulties".

Securities will usually be paid as cash from the business or director, or a bond from an approved financial institution that is payable on demand.

Securities will be calculated depending on the employer's previous behaviour and the amount of tax owed.