PAYE late payment penalties and the new regime

From April 2010 a new set of penalties came in for PAYE and NIC payments by employers. HM Revenue and Customs have recently sent out the first batch of warning notices to employers who were late paying their PAYE for April 2010 (month ending 5 May). If you continue to pay late you could incur a penalty of up to 4% of the amount you pay late depending how many times you are late during the tax year. If you pay more than six months late you could incur a further 5% penalty.

We currently understand that the penalties will not be issued automatically by the HMRC computer during the year but after 6 April 2011, HM Revenue and Customs will undertake a manual review of late payments and issue penalties manually on a risk-assessed basis. Although we have heard comments that the penalties will be applied ‘gently’ to begin with, we do not know how this will be applied in practice.

To minimise the risk of penalties you should:

• Pay your PAYE/NIC on time if at all possible
• If you are struggling to pay agree a formal Payment Plan with HMRC, if you keep to this the penalty will not arise
• If you are notified of a late payment and believe you have a ‘reasonable excuse’ for the late payment, appeal against the notice or penalty as soon as possible. This can remove or reduce the amount of the penalty