PAYE late submission penalties

As of 6 October 2014, HM Revenue & Customs (HMRC) will start to apply in-year penalties for PAYE RTI submissions that are received late or are outstanding at that date. What this means is that 5 October is a significant date, because on or before this day if you make any outstanding submissions, you will be able to avoid a penalty.

The penalty rules apply to every PAYE scheme, so employers who are running more than one scheme need to be particularly vigilant that all their schemes are up to date. Penalties will be applied where Full Payment Submissions (FPSs) have not been filed on or before the date when employees were paid or in a situation where a submission is justifiably late but HMRC have not been informed of this using the late reporting reason field. Penalties will also be applied if HMRC haven’t received the anticipated number of submissions from an employer.

In order to avoid PAYE late penalties, employers must make sure that they submit an FPS every time an employee is paid and that submission must be made either on or before the day that the payment is made. If employers find themselves in a situation where no employees are paid in a month, they must submit a nil Employer Payment Summary (EPS) by the 19th of the following tax month. Failure to do so, under the new regime will give rise to a late filing penalty and although you’ll have the opportunity to appeal this decision, it is better to stay up to date and avoid appeals if at all possible.

In order to help people make sure that their PAYE submissions are up to date, HMRC will issue Generic Notification Service (GNS) warning messages letting you know that you are at risk of being penalised if you don’t take action.

Late penalties will be charged for each tax month that submissions haven’t been made on time. What this means is that employers who pay weekly, even if they have had two or more late returns within the tax month, will only face one penalty. There will be one month of grace for every employer in every tax year, giving HMRC the potential to charge up to eleven late penalties per tax year, per scheme. New employers will have 30 days grace before penalties are applied. Under certain circumstances, employers with 9 or fewer employees will qualify for a reporting relaxation in the current tax year and the next tax year. However, if you think this relaxation might apply to you, then it’s essential that you are familiar with what your obligations are and make every effort to meet them.

Late penalty amounts depend on the number of employees and range from £100 for schemes with 1-9 employees to £400 for schemes with 250 or more employees. Where returns are three months late or more, HMRC reserve the right to charge an additional penalty of 5% of the tax and National Insurance Contributions that would have been paid should the return have been sent on time. HMRC have stated that they will apply these penalties only for “the most serious and persistent failures”.

Where penalties apply, penalty notices will be sent by letter at the end of July, October, January and April and must be paid within 30 days of their date of issue to avoid interest charges.

If you’d like help to keep your PAYE penalty-free then call us on 0800 018 0590.