Spring Statement: extending the securities regime to corporation tax

From April 2019, corporation tax and Construction Industry Scheme (CIS) deductions will be covered by security deposit legislation and the government is now consulting on how to best implement these changes

At Autumn Budget 2017, the government announced that it will extend the scope of the existing security deposits regime to include corporation tax and CIS deductions, which will effectively allow HMRC to clampdown on defaulters.

Corporation tax and CIS securities will be targeted specifically at high risk businesses that fail to comply with their tax obligations, or where those behind the business are connected with previous business failure that resulted in loss of tax.

HMRC currently has powers to require a security deposit for 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.

Those individuals that fail to provide a security could be faced with a criminal sanction or an unlimited fine.

All of these taxes have monthly or quarterly reporting or payment cycles so any default can be identified reasonably fast. For corporation tax, the amount of tax due on a company’s profits will only be established after an accounting period of up to 12 months, and the return does not need to be filed until 12 months after the end of the accounting period.

Therefore the timing of imposing a security would need to consider the business’s circumstances and ability to pay.

With CIS HMRC is proposing that a security may be required from any person that is required to register as a contractor where HMRC believes there is a risk.

Another proposal put forward in the consultation is that it should be an offence for a contractor to make a payment under a construction contract to a subcontractor when they have been required to give security and have not done so.

The consultation closes on 8 June 2018.

Extension of security deposit legislation 

Report by Amy Austin

Amy Austin |Reporter, Accountancy Daily [2016-2019]

Amy Austin was reporter, Accountancy Daily and Accountancy magazine, published by ...

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