Late payment penalties for PAYE / NIC

Produced by Tolley in association with Philip Rutherford

The following Owner-Managed Businesses guidance note Produced by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Late payment penalties for PAYE / NIC
  • Introduction
  • Operation of the penalty
  • Error by HMRC
  • Notification of the quantum of the penalty
  • Reasonable excuse
  • HMD Response International
  • Dudman Group Ltd
  • The Bale Group Ltd
  • ID Machinery Ltd
  • More...

Late payment penalties for PAYE / NIC

Introduction

The late payment of income tax and National Insurance contributions (NIC) via PAYE, student loan deductions and income tax due under the construction industry scheme (CIS) will attract both interest and penalties.

The late payment penalties apply to all employers and contractors regardless of size. The regime covers all payments made throughout the year, whether on a monthly or quarterly basis, and includes all payments in respect of:

  1. income tax payments via PAYE

  2. student loan deductions

  3. payments under the CIS, and

  4. Class 1 NIC via PAYE

FA 2009, Sch 56, para 5

Since October 2013, most employers are now required to file PAYE returns in real time. The RTI requirements govern how and when filings have to be made. For further information on RTI, please refer to the Real time information guidance note in the Employment taxes module. While RTI governs the nature of the submission to HMRC, it has not changed the due dates for filings, and paying tax and NIC to HMRC. There are separate penalties for failure to comply with the RTI requirements. Historically, HMRC had difficulty in identifying late payments readily. The introduction of RTI gives HMRC easy access to see what payments have been made late.

Penalties in relation to late payment of Class 1A and Class 1B NIC are discussed at the end of this guidance note.

Operation of the penalty

The penalty is calculated based on three factors:

  1. the amount not paid by the due date (ie if part of the payment is late, a penalty is only charged on the amount outstanding)

  2. the number of times in the tax year that payments are made late (ie the penalty percentage increases the more defaults occur in the year)

  3. the length of time the payments are outstanding (ie further 5% penalties are charged after six months

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