PAYE – LATE PAYMENT PENALTIES

2010 saw HMRC bring in penalties for late payment of PAYE.  The late payment penalties apply to all employers and contractors – whether you employ one or several hundred employees or subcontractors.

Up to recently HMRC have been sending 2 warning letters if they think you have not paid the due PAYE on time.  In April 2014 this will change and only one warning letter will be sent before penalties are issued.

Penalty charges for late monthly and quarterly PAYE payments (source HMRC)

Note: The first failure to pay on time does not count as a default.

Example: ABC Ltd paid four payments late in the tax year 2013-14. The first late payment is not counted as a default therefore they have three defaults in total, which means that a penalty of 1% is due on the total amount of PAYE paid late (excluding the first late payment).

For tax years 2014-15 onwards, if ABC Ltd paid months 2-6 late, the first late payment (month 2) is not counted as a default. The employer has one default in the first quarter (month 3) and three in the second quarter (months 4-6). This means that a penalty of 1% will be charged on the amount paid late for month 3 at the end of the first quarter (July). At the end of the second quarter (October) a penalty of 1% of the month 4 and 5 amounts, and 2% of the month 6 amount of PAYE paid late, will be charged.

No excuses!

HMRC will not accept excuses. Here are some of the examples they have been given previously

• Pressure of work
• Lack of information
• HMRC did not remind me to pay
• Ignorance of basic law and guidance

In addition, the law says that HMRC cannot usually accept as reasonable:

• Cash flow problems/lack of money – HMRC cannot treat cash flow problems or lack of funds as reasonable unless they are due to unforeseeable events outside your control – if you are having difficulty paying there’s information in the next section ‘What to do if you can’t pay’
• Relying on someone else. HMRC cannot normally accept that you have a reasonable excuse just because you asked someone else to make the payment and they did not – however if you have done all you reasonably can to make sure the person does make the payment on time, you may have a reasonable excuse, for example, you may have explained carefully to the person what they have to do, and by when – you may have checked on their progress and reminded them.