Sarah Bradford reports on HMRC’s webinar for employers on PAYE late filing penalties. It covered when HMRC charge penalties, how to avoid those penalties, what to do if you get a penalty and what action to take if you disagree with a penalty charge.
When and why
Penalties are charged under RTI to deter employers from filing the required returns late. A penalty charge may be triggered where in any tax month:
- a full payment submission (FPS) is filed late without a valid late reporting reason;
- the expected number of FPSs are not received for a tax month; or
- no payments are made to employees in the tax month and an employer payment summary (EPS) is not filed.
A penalty is not charged for the first tax month in which any of the above occurs. Further, HMRC has recently confirmed that the three-day period of grace under which penalties will not be charged if the FPS is submitted within three days of the payment date will continue to apply for 2017/18. However, this is a concession not an extension of the statutory deadline and employers who regularly file within this window may be assessed for a penalty.
New employers are not regarded as filing late if they send their first FPS within 30 days of paying their first employee for the first time.
FPS filing deadline
The FPS must be sent to HMRC electronically at or before the time that the payment is made to the employee and the time at which the employee becomes entitled to the payment. This should not normally cause a problem. If the employee is paid monthly in arrears on the last day of the month, the FPS should be filed on or before the last day of the month. Assuming the employer runs the payroll and files the FPS as part of that process and then pays the employee on time, the FPS will not be late.
However, problems may arise if the payroll is run late – for example at the start of the following month – as even if the FPS is sent before the employee is actually paid, it will be deemed to be late as it will be sent after the time at which the employee became entitled to the payment (ie the last day of the previous month).
Where an FPS is filed late, the correct late reporting reason should be included on the submission using one of these code letters.
Avoiding a penalty
Avoiding a penalty is simple – just make sure that all required FPSs are submitted on time each month and that if there is a month when no payments are made to employees, that an EPS is submitted instead. Compliant employers are not charged penalties.
Where submissions are late for more than one month in the tax year, a penalty is charged. Only one penalty is charged for each month regardless of the number of late FPSs in the month. Where employees are weekly paid, penalties too are assessed by reference to late submissions for the tax month rather than for each week.
The amount of the penalty depends on the number of employees in the PAYE:
- £100 for one to nine employees;
- £200 for 10 to 49 employees;
- £300 for 50 to 249 employees; and
- £400 for 250 or more employees.
A further penalty of 5% of the tax and National Insurance due is charged where the submission is more than three months late.
The penalties are assessed in-year for each quarter following the end of the quarter. HMRC is now assessing penalties for the quarter to 5 July 2017 and those penalties will be issued in September 2017.
Penalty notices are sent out by letter and each contains a unique ID, details of how to pay and instructions on how to appeal if you disagree with the penalty. Penalties should be paid within 30 days of the date on the notice.
An appeal can be made only if either HMRC raised the penalty incorrectly or the employer had a reasonable excuse for filing late.
An appeal against a penalty must be made within 30 days of the date on the notice and can be made online via PAYE Online (select “appeal a penalty”, click the unique ID and select the reason for the appeal from the drop-down list) or by letter.
If the appeal is successful the employer will receive a Generic Notification Service (GNS) message.
You can watch a recording of this HMRC Employer’s webinar here.