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Newsletter - Summer 2011

Employer Penalties

Employers who fail to pay their PAYE liabilities on time every time and in full may face penalties.

Since 6 April 2010, HMRC have had the right to impose late payment penalties on all employers, regardless of size, who fail to make their monthly or quarterly PAYE payments on time. The payments covered by these rules not only include PAYE but National Insurance contributions, Construction Industry Scheme deductions and Student Loan deductions.

Unfortunately some employers may be blissfully unaware that a penalty may be due as HMRC's approach during 2010/11 has been to issue a warning letter only, and even this has been at their discretion. The receipt or not of such a warning letter is not necessarily an indication that a penalty notice will be levied. In fact HMRC have up to two years after the payment default to issue a penalty notice. The penalties are risk assessed so HMRC may not charge the penalties to all late paying employers. However, HMRC have made it clear that such notices will start to be issued from May 2011.

So how do the penalties work?

No penalty will be imposed for the first late payment in a tax year but subsequent breaches may attract penalties from 1% to 4% depending on the number of late payments of PAYE/NIC etc per tax year. A further penalty of 5% may be charged if any amounts are still outstanding after 6 months and then again after 12 months.

Don’t owe anything?

It is important to let HMRC know that you have nothing to pay either by:

completing the online form: www.hmrc.gov.uk/payinghmrc/paye-nil.htm
sending a signed payslip with the amount completed as “NIL”
phoning 0845 3667816 with your HMRC accounts office reference and advising them which period no payment is due for.

Late returns

2010/11 also saw the demise of the seven days' grace for filing the P35 and P14 end of year returns which have to be filed by 19 May following the end of the tax year. These annual returns need to be filed online by almost all employers. Penalties for late filing of these returns are currently fixed at £100 per month for every 50 employees.

Please get in touch if you want help with payroll issues or you have received a penalty notice which you would like us to check.

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