HMRC are now sending out warning letters to employers advising them that their previous failure to pay PAYE and NIC on time could result in HMRC requiring them to give security in respect of PAYE/NIC if they do not pay the amounts currently due. If the debt is not paid this could result in a ‘Notice of Requirement for Security’ being issued without further notice. Failure to provide the security is a criminal offence and a fine of up to £5,000 may have to be paid.
The level of security demanded is likely to be based on the level of contributions due by the company over a four month period plus the amount of arrears at the date of the notice. Payment must be made by the date specified in the notice which will not be less than 30 days later. The amount demanded can be appealed within 30 days of receipt of the notice.
It is important to note that although the security may in part be calculated on the level of arrears the provision of the security demanded will not prevent HMRC from pursuing the recovery of the overdue debt. This could result in HMRC giving notice of their intention to commence ‘Taking Control of Goods’ enforcement action. This enables HMRC to seize goods to settle outstanding debts and operates in a similar way to the old law of distraint which was replaced on 6 April 2014.
These changes coupled with the introduction last year of the Real Time Information legislation which requires employers to provide up to date information on PAYE/NI owing to HMRC, mean that HMRC are in a far better position to apply pressure on those businesses who continue to use crown debt to fund their business. Those who do not comply with HMRC’s demands will inevitably end up being forced out of business.
Companies who are, or may find themselves in a position, where they are unable to make payments to HMRC as and when they fall due should seek advice urgently before the Inspector comes to call. Failure to do so will severely limit or deny them the time to consider practical options to get the company back on the road to recovery.