One of the aims of HMRC introducing the new PAYE service during July 2009, which saw the merging of 12 regional databases into a single national computer system, was to allow for the implementation of new rules outlined in Finance Act 2009 sch56 regarding late payments of PAYE. From May of next year “you may have to pay a penalty if you do not pay the PAYE due each month, on time and in full” according to a recent issue of the HMRC Employer Bulletin magazine.
Although some penalties have been available to HMRC regarding PAYE for some time (such as for late filing), penalties for late PAYE payments are mostly new.
Penalties will be applied after the second failure to pay on time in the year, and will be calculated as a percentage of the amount paid late (for up to three more late payments) at one per cent of each amount (paid late). Each penalty can rise to as much as four per cent if there are repeated failures, and additional penalties of five per cent can be applied for liabilities unpaid for more than six months, and another five per cent after 12. So for example, an employer paying a monthly liability of £3k but is late by a week paying five of those in the year will incur a penalty of £120 from next year.
No penalties are payable if employers can demonstrate a ‘reasonable excuse’, but this will no doubt leave the recipient with the prospect of having to deal with an automatically-generated penalty notice.
This new measure will cause headaches for a lot of people, especially when you consider that for years it has never been a problem to be a little bit late in making in-year PAYE payments. Our advice is to consider the matter now and be ready to prioritise the payment of PAYE liabilities come the new tax year.
