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Security Deposits – Spring Statement 2018

The government announced at Autumn Budget 2017 that the current scope of the security deposit legislation will be extended to include corporation tax and Construction Industry Scheme (CIS) deductions from April 2019. HMRC are now seeking views on proposals for implementing this change to ensure that it is introduced in the most effective way, that the legislation is targeted, and that there are appropriate safeguards. The proposals are set out in the consultation document entitled Extension of the existing security deposit legislation to include CT and CIS deductions.

One of the compliance tools currently available to HMRC is the power to require high-risk businesses to provide an upfront security deposit, where they believe that there is a serious risk to the revenue. Security intervention is only considered in a small number of cases where there is clear evidence that a significant amount of revenue, relative to the size of the business, is at risk. In addition, there must either have been failure to comply with return filing and payment obligations, or the personnel actively involved in a current business must have been actively involved in another business that failed to pay the taxes that were due.

HMRC currently have powers to require a security deposit in respect of VAT, Pay As You Earn (PAYE) and National Insurance Contributions (NICs), Landfill Tax, Aggregates Levy, Climate Change Levy, Insurance Premium Tax and certain Gambling Duties. However, HMRC are aware that the non-compliant behaviours which trigger security action will typically be found across other aspects of these businesses’ tax affairs. This consultation therefore seeks views on proposals to extend the legislation to corporation tax and CIS deductions.

The consultation will run until 8 June 2018.

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