Extending the scope of PAYE

Following the recent press coverage on senior government personnel operating through personal companies and HMRC’s failures on obtaining the right to PAYE in the courts, the government is consulting on how it can better collect PAYE.

The consultation proposes to place the onus firmly on the paying company by imposing an obligation to deduct PAYE on payments for “controlling persons” irrespective of to whom the monies are paid.

A controlling person is defined as:

“someone who is able to shape the direction of the organisation having authority or responsibility for directing or controlling the major activities of the engaging organisation during the year.  This would be someone who has managerial control over a significant proportion of the organisation’s employees and/or control over a significant proportion of the budget of the organisation.”

This is likely to have a significant impact as the definition is widely drafted and likely to catch most senior people.  It is also likely that the paying company will err on the side of caution as the proposals will put the risk – PAYE, NIC, interest and penalties – firmly with them.

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