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Penalty Shoot Out To Include PAYE, NIC and CIS Late Payments
Posted by Andy Richens on 15/03/2010
When the HM Revenue & Customs (HMRC) was formed, it inherited a number of different penalty regimes from the old Inland Revenue and Customs and Excise departments.
The alignment and modernisation of the penalties structure has been under consideration since 2006, with legislation introduced each year since then.
The latest addition imposes penalties from 6 April 2010 on late in year payments of pay as you earn (PAYE ) and national insurance contributions (NIC) by employers, and similarly to payments under the construction industry scheme (CIS).
Under the new structure, the first failure to pay the tax by the due date does not count as a ‘default’. A further one, two, or three failures to pay during the year will result in a penalty of 1% of the amount of these defaults. The next three failures in the year attract a penalty of 2% of the amount of these defaults. The following three failures in the year attract a penalty of 3% of the amount of these defaults. Any further failures in the year will attract a penalty of 4% of the amount of these defaults.
If the tax due remains unpaid after six months, the penalty is increased to 5%, and after 12 months to 10%.
HMRC do have discretion to reduce a penalty in special circumstances, but this does not include the existence of an overpayment, nor the inability to pay unless a time to pay agreement has been made.
Under previous rules, an employer who delays payment of PAYE and NIC until two weeks following the end of month 12, will not have incurred a penalty. However, from April 2010, this action would result in penalties of 1% plus a further 5% of the amounts due in June, July and August, 2% plus 5% of the amounts due in September and October, 2% of the amount due in November, 3% of the amounts due in December, January and February, and 4% of the amount due in March.
Separate penalties already apply for late or incorrect submission of P35, P14 and CIS returns. So, by the time the summer World Cup is under way, employers and contractors may already have experienced the spectre of penalties.