HMRC have just announced a new penalty regime for the late payment of monthly PAYE & NIC, to come into effect from May 2010.
This appears to be another attempt to collect more revenue without increasing any tax rates and is likely to affect small employers much more than large employers, who will have a whole payroll department to be able to deal with it.
Current Position
Monthly payments of PAYE & NIC are due by the 19th of the following month, so the liability for September 2009 should be paid by 19th October 2009. Currently, there are no penalties for these payments being made late and interest is not charged until the tax year is over. At this point, interest is only charged on sums overdue past 19th April after the end of the tax year.
New Penalties
Penalties will be levied from May 2010 if more than one PAYE payment is late. The penalties will start at 1% of the amount that should have been paid, increasing up to 4% where there is a history of late payments. Thus, if you are constantly late, you could be paying penalties in excess of 30% over a full year.
Who will it apply to?
It applies to all employers, small or large. HSBC Bank will have the same regime as a husband and wife who employ a nanny via PAYE.
How can Penalties be Avoided?
HMRC’s advice is good, not to say predictable – they advise you to pay the right amount on time!
You will not get a penalty if you have a reasonable excuse for being late but there is no guidance as to what would constitute a good excuse. Many years experience of dealing with HMRC gives me the feeling that there will be very few good excuses.
And don’t think that weekends, bank holidays and postal strikes will allow you some legitimate delays. You are just advised to get your payment posted earlier or paid electronically.
On PAYE issues, HMRC have always advocated a ‘penalise first, ask questions later’ approach and insist on written appeals if there is an error. I foresee a lot more PAYE paperwork for the hard-pressed small businessman to deal with.
John Mumford is the Managing Director of Carrington Accountancy
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