With effect from 19th May HMRC will be charging interest penalties on any late payment of PAYE.

The late payment penalties apply to all employers and contractors – whether you employ one or several hundred employees or subcontractors. They apply to monthly, quarterly and annual periods of PAYE starting on or after 6 April 2010.

Late payment penalties could be charged on any PAYE amount due if it isn’t paid in full on time, including

* monthly or quarterly PAYE (Pay As You Earn) * student loan deductions * Construction Industry Scheme (CIS) payments * Class 1 National Insurance contributions (NICs) * annual payments of employers’ Class 1A NICs * annual PAYE Settlement Agreements (PSA) payments * PAYE determinations or charges raised

Notification of a late payment penalty

If a penalty is due, HMRC will send you a late payment penalty letter telling you how much you owe and when you have to pay it by. It will also tell you what to do if you think the penalty is wrong, including how to appeal.

For penalties relating to late payments that occurred in the 2010-11 tax year, HMRC will send notifications of late payment penalty charges after the end of the year. HMRC has up to two years after the late payment occurred to issue a penalty letter.

It is your responsibility to make sure that you pay on time. HMRC does not issue reminder letters.

PAYE/National Insurance payments and deadlines

Penalty rates and how they will apply

Penalties will be charged on each PAYE scheme independently. Therefore, if you operate more than one PAYE scheme you need to make sure that amounts due for each individual PAYE scheme reference is paid in full on time.

Monthly or quarterly PAYE payments

You will not be charged a penalty if only one PAYE amount is late in a tax year – unless that payment is over 6 months late.

The amount of the penalty will depend on how much is late and how many times your payments are late in a tax year. So if you pay part of what is due on time then any penalty will only be charged on the part that is late. The penalties range from 1% to 5% depending on hoew many times you have been late in making your payments.

Visit the HMRC WebSite for the current rates at http://www.hmrc.gov.uk/paye/problems-inspections/late-payments.htm

If you have still not paid a monthly or quarterly amount in full, after six months you may have to pay a penalty of 5%. A further penalty of 5% may be charged if you have not paid after 12 months. These penalties apply even where only one payment in the tax year is late.

*****