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PAYE: New interest charges now apply

20/04/2017

Employers are under the cosh again. This time it’s for in-year interest charges on late PAYE payments. What steps can you take to avoid them?

Changes. In April 2013 RTI radically changed the way employers report payroll and CIS data to HMRC. With it came the threat of penalties for not submitting reports on time. These were due to be introduced in April 2014, but have been postponed until October. However, in-year late payment interest has applied from 20 May 2014.

The way things were. Until 2014/15 if an employer paid late they were liable to a penalty, but as long as payments were brought up to date by 19 April following the end of the tax year, no interest would be charged. For example, where an employer was late paying their May 2013 PAYE, as long as it and any arrears for subsequent months were fully paid by 19 April 2014, HMRC wouldn’t charge interest.

The way it is now. For 2014/15 onwards HMRC will charge interest from the day after payment was due, which is the 19th of each month. For example, interest is charged on late paid PAYE etc. for the tax month of April, which ended on 5 May, if payment hasn’t been received by HMRC by the end of the 19 May. HMRC’s interest rate on overdue payments is currently 3% per annum.

Tip. Consider paying electronically. Not only does it give you greater certainty that a payment has reached HMRC, but the payment due date is extended by three days to the 22nd of each month.

Keep track. HMRC insists that if you pay on time you’ll have no problem. The reality is likely to be different. Over the last year HMRC has made a hash of keeping its PAYE records in order. There have been countless cases where HMRC’s records haven’t tied up with employers’. While it has overhauled its system it’s yet to be tested. So our advice is to register to use HMRC’s online Dashboard which allows you to easily check for discrepancies.

In Summary

Ensure PAYE etc. payments reach HMRC by the 19th of each month. If you pay electronically, the deadline is extended by three days. Registering to use HMRC’s online Dashboard will help you keep track of payments.