Tougher penalties for late PAYE

Time was when an employer could (in theory at least) make no monthly payments of PAYE throughout the year, pay over the lot by 19th April and suffer no unwelcome consequences. Interest-free loan from HMRC, anyone? Ah - nostalgia is not what it used to be!

For some years, late paid PAYE deductions have suffered the full wrath of, er... a 3% per annum interest charge, though the irritant factor of Collectors of Taxes (now termed 'Field Force Agents') visiting when your PAYE remittances deviate from the norm may have been far more effective. However, from 6 April 2010, the rules have changed. On that date penalties along the lines of VAT Default Surcharges came into force.

The penalties are based on the number and amount of late payments within a tax year, and can be charged during the year or after it. The first transgression is free (apart from the interest, of course); but thereafter the second to twelfth late payments attract Penalties ranging from 1% to 4% of any outstanding tax each month. And (stealing from the Self Assessment rules) a further 5% penalty is levied on any tax or NIC outstanding for more than 6 months, with another 5% due if the default continues for the full year.

So - a potential aggregate penalty of up to 14% on top of the interest charge now removes something of the temptation to delay remittances of PAYE; and you can be assured that PAYE remittances will be under ever-closer scrutiny in the future.

David Whiscombe
Director, BKL Tax
Member, UK200Group Tax Panel