Pictured above: Paul Bulzacchelli

In 2010 HM Revenue & Customs (HMRC) introduced a penalty regime applicable to late payments on pay as you earn (PAYE) and national insurance (NIC) payments for employee wages.

The penalties are applicable for the 2010/11 tax year and HMRC have just recently commenced enforcing and issuing fines for late payments and underpayments. However, Paul Bulzacchelli, managing director at Lichfield based Inspired Accountants has warned that many businesses could easily be caught out and miss a deadline. He explained: "Electronic payments must be cleared and reach HMRC's bank account no later than the 22nd of the month following the end of the month or quarter to which it relates. For postal payments you need to ensure your cheque reaches HMRC no later than the 19th of the month following the end of the month or quarter to which it relates.

"Where I think it could be easy to miss the payment deadline is when the deadline falls on a weekend or worse still a Bank Holiday. Let's use the electronic payment method as an example. Ordinarily to meet the 22nd deadline, you have to make your payment on or before 19th of the month. Where the 22nd falls on a weekend or bank holiday, you must ensure that your payment arrives no later than the last working day before the 22nd. In the worst case scenario this means that the payment will have to be made on 17th, 5 days before the deadline, which is enough to catch some businesses out." 

The penalties are based on the number of defaults and late payments and increase in magnitude with the number of defaults that occur. Penalties vary from 1% to 4% of the late amount depending on how many payments are late. There is no penalty if you pay late once in a tax year, unless the payment is over 6 months. There are also penalties of 5% if other payments such as class 1a NICs are late with a further 5 % charge being raised 12 months after the penalty date.