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When security deposits for PAYE and CIS are used

HMRC is able to ask employers for a security where there is a serious risk that they will not be able to pay over their PAYE and Class 1 National Insurance deductions to HMRC. The power is used by HMRC in high risk situations such as employers who:

1. •

   deliberately choose not to pay

2. •

   run up PAYE debts in their companies, close down their companies writing off the debt and then set up new ones to evade tax

3. •

   build up large PAYE debts and penalties and do not respond to HMRC contact

ITEPA 2003, s 684(4B); SI 2003/2682, reg 97N

The security deposit regime also includes Construction Industry Scheme (CIS) deductions. For further details, see Simon’s Taxes E4.11140 and HMRC Securities Guidance Manual SG13000.

How security deposits work

HMRC require the security deposit in one of the following forms:

1. •

   a cash deposit held by HMRC

2. •

   paid into a joint taxpayer / HMRC account

3. •

   a bond from an approved financial institution