The government are concerned that a small number of businesses choose not to pay the tax they owe or seek to unfairly reduce their tax bill. One of the ways available to HMRC to tackle this is the power to require high-risk businesses to provide an upfront security deposit where there is a serious risk of non-compliance. Currently, these powers only apply to certain taxes and duties, but the non-compliant behaviours which warrant security action will be typically found across other aspects of these businesses’ tax affairs.
At Autumn Budget 2017, it was announced that the scope of the existing security deposits regime would be extended to include corporation tax (CT) and the Construction Industry Scheme (CIS). Legislation will be introduced in Finance Bill 2018-19 to take effect from April 2019. As part of the Spring Statement a consultation has been published seeking views on the extension of the powers, from interested parties particularly those who might be affected by these changes including businesses, CIS contractors and subcontractors, advisers and representative bodies. The closing date for comments is 8 June 2018.
Alongside this change, HMRC will publish a separate discussion paper tax Abuse and Insolvency: A Discussion Document which will seek views on how to tackle the small minority of taxpayers who abuse the insolvency regime in trying to avoid or evade their tax liabilities through the use of companies or other limited liability entities.
Businesses that experience genuine difficulties are not the target or either of these measures. They are targeted at those who won’t pay rather than can’t pay, the tax that is due. Nevertheless, HMRC estimates that extending security provisions to CT and CIS will result in an additional 400-500 cases in scope for securities action each year.