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Penalty Guidance on Late Payment of PAYE

HMRC have been warning employers for some time that they may have to pay a penalty if they do not pay their PAYE deductions on time. They have now issued more detailed guidance on the way in which the penalties will work. The penalties will apply to PAYE deductions due for a period starting on or after 6 April 2010 include PAYE, Student Loan deductions, Construction Industry Scheme payments, Class 1 NICs, annual payments of employers' Class 1A NICs and annual PAYE Settlement Agreements payments.

Payments of these deductions should generally be made to HMRC  by 19 of each month (or 22 if paid by electronic means and cleared into HMRC’s bank account).  If average monthly payments are under £1500 employers may be able to pay quarterly.

HMRC are advising employers to let HMRC know if they are likely to have difficulty making a payment on time, so that arrangements can be made and penalties can be avoided. Their guidance states that where employers enter into ‘time to pay’ arrangements, before the liability becomes due, no penalty will be charged.

Penalties for late payment start at 1% of the late paid amount, increasing to 4% depending on the number of late payments in the year. Extra penalties will be added where liabilities are outstanding for a further six and then 12 months. No penalties will be issued until after the end of the tax year.

Internet link: HMRC guidance on late payment

For more information, contact Baines Jewitt on 01642 632032

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