Chartered Management Accountants and Consultancy Services for Small and Medium Sized Businesses

PAYE changes from 6th April 2010

From the 6th April 2010, there will be a change in the monthly PAYE payment regulations.

Under the present system, the PAYE payments (which includes the Construction Industry Scheme payments, if this applies to you), are due for payment by the 19th of the following month.

For example, the month of April 2010, ends on the 5th May 2010, and should be paid by the 19th May 2010.

In practice if the payment was late, and provided the total to be paid for the entire tax year was paid by the 19th April each year, HMRC, never really bothered.

Other than a few reminders that would be sent out, no action was usually taKenneth.

From the 6th April 2010, HMRC will be introducing a new penalty regime, whereby penalties may be incurred if PAYE payments are received late.

I have extracted a copy of the penalties, from HMRC’s web site, which is given below.

The penalties are based on the number of times, payments are received late in a tax year, so they can only be calculated, at the end of a tax year. There will be additional penalties, where PAYE payments are over 6 months late. There are also penalties for late payment of Class 1a, and Class 1b NIC, where these apply.

From reading the HMRC web site the penalties will only apply to the proportion of the total PAYE/NIC due for the year, that are paid late.

The complexity is going to be that until the end of the tax year is reached, the final penalty figure won’t be known, or be able to be calculated.

A full list of the new penalties, can be found at the HMRC website, as below.

http://www.hmrc.gov.uk/employers/paye-penalties-faqs.htm#6a

The table below shows how the penalties will be calculated:

No of times payments are late in a tax year

Penalty percentage

Amount to which penalty percentages apply

1

No penalty

Total amount that is late in the tax year (ignoring the first late payment in that tax year).

2-4

1%

5-7

2%

8-10

3%

11 or more

4%

The changes are going to place in important emphasis, on declaring and paying the monthly PAYE on time. i.e. by the 19th of the following month.

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