HM Revenue and Customs charges late payment penalties on PAYE amounts that aren’t paid in full and on time. This article details what these penalties are for and how much they can be.
What do the late payment penalties cover?
The answer, of course, is pretty much everything to do with PAYE, including:
- monthly, quarterly or annual PAYE
- Construction Industry Scheme (CIS) deductions
- Class 1 National Insurance contributions (NICs)
- annual payments of employers’ Class 1A and Class 1B NICs
- student loan deductions
- determinations made by HMRC where it appears that there may be further tax payable
- decisions, for example about a person’s liability to pay NICs and the amount payable
How much do you pay as a penalty?
For late monthly and quarterly PAYE payments, the following penalties apply, although the first failure doesn’t count as a default:
|Number of defaults in a tax year||Penalty percentage applied to the amount that is late in the relevant tax month (ignoring the first late payment in the tax year)|
|1 to 3||1%|
|4 to 6||2%|
|7 to 9||3%|
|10 or more||4%|
Daily interest will continue to build up on all unpaid amounts from the due and payable date to the date of payment.
Are there additional penalties?
Yes. You’ll be charged a late payment penalty if you pay less than is actually due.
If you still haven’t paid a monthly or quarterly payment in full after 6 months, you’ll be charged an additional penalty of 5% of the amounts unpaid.
A further penalty of 5% will be charged if you haven’t paid after 12 months. These additional penalties apply even where only one payment in the tax year is late.
What about end of year adjustments?
If you pay an adjustment after the end of the year under a special arrangement you won’t be charged late payment penalties, as long as you keep to the terms of the arrangement.
Examples of these are the ‘Intermediaries’ rules (often referred to as IR35) or a formal modified PAYE arrangement known as ‘Employment Procedures Appendix 6’.
What about amounts due annually or occasionally?
You may have to pay a penalty if you haven’t paid the full amount by the date known as the ‘penalty date’.
For payments such as Class 1A and Class 1B NICs, HMRC determinations and assessments, amendments or corrections to returns the ‘penalty date’ is 30 days after the due date. For these payments you may have to pay:
- a 5% penalty if you haven’t paid the full amount within 30 days of the due date
- an additional 5% penalty if you haven’t paid the full amount within 6 months of the due date
- a further 5% penalty if you haven’t paid the full amount within 12 months of the due date
In most other cases, the penalty date is the day after the due date.
What happens if you get a penalty?
A notice will include what you owe, how to pay and what to do if you don’t agree with HMRC’s decision to charge you.
You must pay the penalty within 30 days of getting the notice – you’ll be charged interest if you don’t. You can appeal online against the late payment penalties for tax year 2015 to 2016 onwards.
In some cases, HMRC will accept and settle the appeal automatically.
Are there any grounds for appeal?
Yes. These are some of the reasons you can give as grounds for appeal:
- data on the returns was incorrect
- death or bereavement
- fire or flood or natural disaster
- ill health
- information technology difficulty
- no longer have any employees
- no payments to employees
- paid on time
- theft or crime
- time to pay arrangement in place
Contact us for help with your payroll
We are an outsourced payroll services provider. Most of our clients are small businesses that do not have a dedicated HR or finance department to run their payroll, meaning that payroll is often an additional responsibility of one of the directors. When things get busy, this is when things can get rushed and mistakes can be made, especially with detailed tasks such as payroll.
By outsourcing your payroll requirements to us, the responsibility passes to us, leaving you to get on with running the business.
Please contact us or call us on 0121 422 0550 for a chat about how we can help with your payroll.