New Late PAYE Payment Penalties27/04/2010

The late payment penalties apply to all employers, even if you only have one employee and apply to all payments due for the tax year commencing on 6 April 2010. Even if part of the payment is made, a penalty can still apply to the part that was paid late.

The penalties relate to all types of payments due, including:

• - monthly or quarterly PAYE (pay as you earn)
• - student loan deductions
• - Construction Industry Scheme (CIS) payments
• - Class 1 National Insurance contributions (NICs)
• - annual payments of employers' Class 1A NICs
• - annual PAYE Settlement Agreements (PSA) payments
• - PAYE determinations or charges raised

It is important to note that the penalties will not be issued immediately after a late payment has been made but will be sent out after the end of the tax year. HMRC has up to two years after the late payment occurred to issue a penalty letter.

Penalty rates and how they will apply

Penalties will be charged on each PAYE scheme independently. Therefore, if you operate more than one PAYE scheme you need to make sure that amounts due for each individual PAYE scheme reference is paid in full on time.

You will not be charged a penalty if only one PAYE amount is late in a tax year - unless that payment is over 6 months late.

If you have been in the habit of making monthly payments on account and making an annual adjustment at the end of the year, penalties will still be applied as there could be a part of each month’s payment that could be late. It is important to pay the correct amount every time.

The amount of the penalty will depend on how much is late and how many times your payments are late in a tax year. If you pay part of what is due on time then any penalty will only be charged on the part that is late. The table below (which has been taken from HMRC web site) shows how the penalties are calculated. The penalties apply to the total amount that is late in the tax year (ignoring the first late payment in that tax year).

Additional penalties for monthly and quarterly payments over six months late

If you have still not paid a monthly or quarterly amount in full, after six months you may have to pay a penalty of 5%. A further penalty of 5% may be charged if you have not paid after 12 months. These penalties apply even where only one payment in the tax year is late.

Penalty dates

The penalty date varies according to the type of payment.

For payments such as Class 1A NICs; HMRC determinations and assessments; and amendments or corrections to returns the ‘penalty date’ is 30 days after the due date. This means that for these payments you may have to pay a 5% penalty if you have not paid the full amount within 30 days of the due date an additional 5% penalty if you have not paid the full amount within 6 months of the due date a further 5% penalty if you have not paid the full amount within 12 months of the due date.

In most other cases, the penalty date is the day after the due date.