How to Escape PAYE Penalties

The general rule is that if you miss the PAYE deadline of the HMRC or break one of many established rules where a penalty applies HMRC will let you know immediately the penalty applicable. However, the new PAYE late payment penalties are somewhat different from the other penalties.

The HMRC reviews his records and seeks to identify the retrospective patterns. The objective of this exercise is to identify employers who are systematically trying to avoid paying tax and those who are genuinely trying to pay tax.

In a court case sometime back an appeal against a PAYE late payment penalty the tribunal noted that had the employer engaged with HMRC more constructively, a penalty might not have been issued in the first place. Therefore, where you know you won’t be able to pay on time you might avoid a penalty simply by contacting the HMRC and letting him know when you expect to be able to pay.

If receive a penalty however, check the calculation thoroughly as HMRC often makes errors. The penalty is calculated on a sliding scale between 1% and 4% of the total PAYE/NI paid late, depending on how many times this happens in a tax year

Lower penalties for smaller employers

There’s no special late payment rule for employers who make their PAYE tax and NI payments quarterly because the monthly amounts due are less than £1,500. The same sliding scale applies which means that because they have only four payments to make during the year the maximum penalty they can be charged is 1% of any PAYE tax and NI paid late. Where employers have had insufficient funds to pay on time, this will only count as a reasonable excuse where this is attributable to events outside the control of the employer.

If you have any queries regaring the payroll, filing relevant documents to HMRC or penalties please contact KVS Accountants. KVS serve as accountants for Parsons Green, Fulham, Putney, Chelsea, Earlsfield, Barnes and Barnes Common

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