PAYE – new late payment penalties
New penalties for the late payment of PAYE came into force in May 2010. These penalties will apply to both employers and contractors who do not pay PAYE on time regardless of whether or not they file online.
The new penalties will apply to tax, National Insurance contributions (NICs), Construction Industry Scheme deductions and Student Loan deductions. The penalties apply to monthly, quarterly and annual periods of PAYE starting on or after 6 April 2010. These new penalties replace the mandatory electronic payment surcharge which applied to ‘large’ employers and contractors who pay electronically.
HMRC have started to send warning letters to employers who do not pay on time. Such letters are issued around two weeks after the payment due date. HMRC will not charge a penalty where only one late payment is made in a tax year as long as that payment is no more than six months late.
Subsequent monthly and quarterly payments which are up to six months late will incur penalties. These will range from 1% to 4% depending on the number of late payments. Monthly and quarterly payments which are more than six months late can incur penalties of 5% with a further 5% if payments have not been made after 12 months.
Annual payments such as Class 1A NICs are liable for up to three penalties of 5% each depending on the lateness of the payment.