Pictured above: Ruth Chapman
A new penalty regime for late PAYE payments which could cost
businesses thousands of pounds has been introduced by the
taxman.
The warning comes from Ruth Chapman, Director at Prime, leading
Midlands accountants based in Solihull and Coventry.
She says that generally the payments should be received by HMRC
as cleared funds by the 19th of each month - the 22nd if paid
electronically - while small employers can agree to pay on a
quarterly basis.
Ruth said: "The amount of penalty incurred depends on the number
of defaults on payment, although HMRC has stated that the first
failure will not be considered a default.
"After that the penalties increase depending on the number of
defaults in the year. These range from 1 - 4 per
cent..
"As an example, a company which pays £15,000 PAYE/NIC each
month and pays the first one late does not pay anything, but if
each month after that it pays one day late then there will
have been 11 defaults by the end of the financial year.
"Simple arithmetic shows that 11 months at £15,000 is
£165,000 and the penalty at four per cent equals
£6,600. In other words the effective interest is over 100 per
cent".
The penalties will be applied irrespective of the number
of days late within a month, and additional penalties will be added
where liabilities are outstanding for a further six and then 12
months.
"One day or 15 days late it does not matter, the same penalty
will apply" Ruth said.
The penalties apply to PAYE; student loan deductions;
Construction Industry Scheme payments; Class 1 National Insurance
contributions; annual payments of employers' Class 1A National
Insurance contributions, and annual PAYE Settlement Agreement
payments.
Ruth said: "The other snag is that HMRC will not consider the
penalty position until the end of the financial year and so, for
example, companies that default in the next 12 months will not be
notified until April 2011 that they have done so".
HMRC is advising employers to let them know if they are likely
to have difficulty making a payment on time and arrangements will
be made and penalties avoided.
The guidance from HMRC states that employers who enter into
'time to pay' arrangements before the liability becomes due will
not be charged a penalty.
"We are advising clients to make sure their payments reach HMRC
as cleared funds well in advance of the monthly deadline or if they
are having difficulty to contact HMRC as soon as possible to make
provisions."