Late payment of PAYE

Employers need to be aware of PAYE late payment penalties

Businesses are being reminded that they may face a penalty charge if they are late in paying their PAYE deductions in full.

The late payment penalties cover all employers and contractors, and apply to monthly, quarterly and annual PAYE deductions for periods starting on or after 6 April 2010.

Which means that they come into force as of May this year.

The penalties could be enforced on any PAYE sum that isn't paid to HM Revenue and Customs (HMRC) on time. These include monthly or quarterly PAYE deductions; student loan deductions; construction industry scheme (CIS) payments; class 1 National Insurance contributions (NICs); annual payments of employers' class 1A NICs; annual PAYE settlement agreements (PSA) payments; and PAYE determinations or charges raised.

Most deductions are due by the 19th of each month or the 22nd if paid electronically.

HMRC has said that, where a penalty charge becomes liable, they will send out a letter explaining how much is owed and when it must be paid by. The letter will also set out what an employer should do if they believe the penalty is wrong, including details on how to appeal.

Penalties will apply to each PAYE scheme an employer may operate, so it's important that the amounts due for each individual PAYE scheme are paid in full and on time.

Monthly or quarterly payments

Employers won't be charged a penalty if only one PAYE amount is late in a particular tax year except in those cases where the payment is more than 6 months overdue.

The level of the penalty will be calculated according to how much is overdue and how many times payments are made late in a tax year. If an employer pays a proportion of what is owed on time, the penalty will only apply to the amount that is late.

If payments are made late between two and four times in a tax year, the penalty charge is 1 per cent.

If payments are made late between five and seven times in a tax year, the penalty charge is 2 per cent.

If payments are made late between eight and 10 times in a tax year, the penalty charge is 3 per cent.

If payments are made late 11 or more times in a tax year, the penalty charge is 4 per cent.

If the amount owing still hasn't been paid in full after six months, then a penalty of 5 per cent could become liable. Another penalty of 5 per cent could be charged if the money has not been paid in full after 12 months.

Annual payments

Employers may face a penalty of 5 per cent of the amount owing if it has not been paid in full by what is called the penalty date.

For payments such as class 1A and 1B NICs, HMRC determinations and assessments, and amendments or corrections to returns, the 'penalty date' is 30 days after the due date.

Late payments may attract an extra 5 per cent penalty if the full amount owing hasn't been paid within five months of the penalty date. And another 5 per cent charge could be imposed if the full amount owing hasn't been paid within 11 months of the penalty date.

Any employer who is experiencing problems in paying their full PAYE amount on time should get in touch with HMRC before the payment is due. It may be possible to agree extra time in which to pay under the Business Payment Support Service.

If HMRC agrees to a timetable for making delayed PAYE payments, there won't be any penalty charges for what is outstanding, so long as the business keeps to the agreement.