Change to penalty position for late paid PAYE and National Insurance - Mazars - United Kingdom
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Change to penalty position for late paid PAYE and National Insurance
A new penalty regime is being introduced in relation to the late payment of tax and Class 1 National Insurance (NI) which are collected via the PAYE system. The new regime will also apply to late paid Classes 1A and 1B NI, amounts due under the Construction Industry Scheme (CIS) and to Student Loan deductions. The new system will come into effect from 6 April 2010 and will affect payments due to be made from May 2010 onwards.
Under the new arrangements the penalty will apply to payments that are made late during the course of the tax year. At present penalties for PAYE and National Insurance only apply to payments not made by the end of the tax year (those penalties will continue to exist).
The level of the new penalties is as follows:
| 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% |
Exceptions
There will be a limited number of exceptions to the new system. In particular, late payment penalties will not apply to:
- Employers who have agreed “time to pay” arrangementswith HMRC, where payments continue to be made in accordance with the terms of the arrangement; and
- Where the employer or contractor has had “reasonable excuse” for not paying on time. (“Reasonable excuse” does not include any late payments which have arisen simply due to an inability to pay).
In the light of this significant change in approach it is important that employers review their systems and procedures that they will not fall foul of the payment deadlines.
If you have clients need to know more about this new regime, please contact a member of the Employment Taxes Services team.
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National contact
Nick Bustin
Senior Tax Manager
+44 (0)20 7063 4277
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