If your or your business has a history of non tax compliance and you work in the construction Industry using CIS, from the 6th April 2019, HMRC will have the power to require high-risk businesses to provide an upfront security deposit where it is considered to be necessary for the protection of the revenue.
HMRC currently already hold this power in relation to VAT, PAYE and National Insurance contributions, Insurance Premium Tax (IPT) and some environmental and gambling taxes but from April 2019, HMRC could also require securities in relation to Corporation Tax and CIS deductions.
HMRC have been clear that this measure will only be applied to those business that are ‘rule breakers’ and they will not be targeting businesses that are experiencing genuine difficulties. It is a possibility that where HMRC considers applying a security they may also consider that taking insolvency action is more appropriate . This will be a changing area as HMRC are currently consulting on tax payers who use insolvency to avoid tax liabilities.
Additionally HMRC are also going to be targeting businesses where personnel may have been or are actively involved in another business that failed to pay tax.
Failure to provide a security when required to do by HMRC will become an offence, which may be penalised by a fine.
HMRC believe Fraud in the Construction Industry is a risk to the Exchequer and have recently made clear that VAT changes will be applied in 2019. The application of further legislation to this sector is not a surprise.