Business News
PAYE penalties could cost you dearly...
Unless you pay on time…
Penalties for late paid PAYE and related liabilities commenced over a year ago, in April 2010, but due to the way the penalties are calculated, nothing has actually been done about collecting these charges until now.
Even now, as HMRC begins its task of identifying defaults and penalties, until Real Time Information is implemented, it is still not clear how the regime will be applied in the period.
The penalties relate to late payments of PAYE and related monies and follow a structure as follows:
- 1 late payment in 1 year – no penalty
- 2-4 defaults attracts penalty of 1% of the total value including the first default
- 5-7 defaults, penalty increases to 2%
- 8-10, penalty increases to 3%
- 11 or more and the penalty increases to 4% of the total value of all defaults
- Penalties not paid 6 months after being issued are subject to an increase to 5%, increasing by 5% again after 12 months
- From April 6 2011, employers must file in-year forms (P45 leavers, P46 joiners) and end year returns online with penalities from £100-£3000 with failure to comply
- Late filing of year end returns will remain to incur a £100 charge per every 50 employees, per calendar month for 2011. In 2012 this will be amended to bring in daily penalties if the form is more than three months late.
Some businesses will clearly be due to pay a penalty for late payments in the 2010/2011 tax year but the number of defaults and rate of penalty will not be able to be calculated until the last payment of the year was due (19th or 22nd April).
HMRC has indicated that the penalty will be applied on a risk assessed basis for the 2010/2011 tax year but there is some confusion as to what this means. An example would be that a business who has paid £500 per month for 11 months, followed by £45,128 in April to finalise the payments for the year would be an abuse of the system; however this could not be highlighted and identified by HMRC unless it inspected the records and worked backwards to determine where the late payment fell and where the £45,128 fits in to the year.
There has been concern felt that businesses and employers could get stung years down the line for late payments which may have slipped under the radar. With no tape in place to prevent officers going back through years of records identifying the amounts on which penalties are due and, many could be presented with a hefty bill collecting a huge penalty in one go.
