Inland Revenue’s recent alert (RA 26/01) clarifies a critical distinction:
PAYE is not a standard business bill.
Because these funds are deducted from employee wages, the IRD views them as money held “in trust” for the Crown.
Using these funds to cover other business costs is now viewed as misappropriation, not just a late payment.
Escalation to criminal charges
IRD is moving away from just use of money interest and penalties (late payment and shortfall), and toward criminal prosecution for those initially using PAYE as an interest-free loan.
Prison time: Serious or repeated failures can lead to up to five years in prison.
Personal liability: Directors can be held personally and criminally responsible for these decisions; the “company” shield will not protect you.
How IRD judges conduct cases
The department looks for patterns of behaviour rather than one-off accidents:
- Intentional deferral: Choosing to pay rent or suppliers over PAYE.
- Repeated failure: Missing multiple months while the business continues trading.
- Avoidance: Failing to communicate until the IRD initiates enforcement.
