Penalties for late payment by employers

Produced by Tolley in association with Philip Rutherford
Penalties for late payment by employers

The following Employment Tax guidance note Produced by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Penalties for late payment by employers
  • 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 Limited
  • More...

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 attracts both interest and penalties.

These penalties are a relatively recent addition to the rules. Before 2009/2010 there were no penalties for late PAYE payments for the majority of employers as long as the amount due for the tax year was paid by 19 April (22 April if the payment was made electronically) after the end of the tax year. FA 2013, Sch 50 amended the PAYE penalties regime to cater for the introduction of Real Time information (RTI) but penalties for late payment under RTI were phased in (see the announcement on the GOV.UK website).

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 construction industry scheme (CIS)

  4. Class 1 NIC via PAYE

FA 2009, Sch 56, para 5

Since October 2013 employers are required to file PAYE returns in real time. The Real Time Information (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. 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

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