As part of its new PAYE tax regime, HMRC has introduced penalty charges for employers who fail to file their payroll information by the deadline. The PAYE appeals process can be fraught with difficulty and not least HMRC can transfer the debt to the director personally via a personal liability notice (PLN) or even a request for security bond (NOR). So, great care must be taken when dealing with substantial PAYE debts.

These penalties apply from:

• 6 October 20124 for employers with 50 or more employees;
• 6 March 2105 for employers with fewer than 50 employees.

On 6 April 2010, HMRC also introduced new penalties for the late payment of PAYE tax. These late payment penalties apply to all employers and contractors and are determined by the number of defaults in a given year.

In this article, we will look at both late filing and late payment penalties, and detail the appeals process for both. We will also include information about the grounds on which your appeal can be made, and the cost of the potential penalties that may apply.

Late Filing PAYE Penalties

You are liable to receive a late filing PAYE penalty if:

  • Your Full Payment Submission (FPS) was late;
  • You didn’t send the expected number of FPSs;
  • You didn’t send an Employer Payment Summary (EPS) when you didn’t pay any employees in a tax month.

How Much Will You Have to Pay?

The amount you’ll pay for a late PAYE submission depends on the number of employees you have. This ranges from a £100 fine for 1 to 9 employees to £400 if you have 250 employees or more. If your submissions are filed more than 3 months late, you may also be subject to an additional penalty of 5 percent of the tax and National Insurance you should have reported.

PAYE Late Payment penalties

The penalty you’ll receive for making late payments is determined by the number of late payments in the tax year. The first default is exempt from a penalty charge if it is the only late payment within a given year. However, you will be penalised for any further late payments in the following way:

• 1 percent of the total defaults (including the first default) when there are 2, 3, or 4 defaults in the tax year;
• 2 percent of the total defaults when there are 5, 6, or 7 defaults in the tax year;
• 3 percent of the total defaults when there are 8, 9 or 10 defaults in the tax year;
• 4 percent of the total defaults if there are 11 or more defaults.

There’s also a 5 percent penalty that can be applied if a payment goes unpaid for more than 6 months after it was due. A further 5 percent penalty payment applies if this period extends to 12 months.

Appealing against a PAYE Tax Penalty

HMRC penalty notices are sent out on a quarterly basis. The penalty notice will include the amount you owe and details about how you can appeal the decision.

Potential grounds for appeal include:

• Ill health
• Incorrect data on the returns
• The return was filed on time
• Death/bereavement
• Fire/flood/natural disaster
• IT difficulty
• No payments made to employees
• Theft/crime
• Other…

Appealing against a filing penalty is a relatively simple and straightforward process that can be completed using HMRC’s online service. Once you’ve logged in, simply select ‘Appeal a Penalty;’ and receive an immediate acknowledgement of your submission. If your grounds for appeal are accepted, HMRC will settle the appeal automatically.

Alternatively, you can appeal in writing by explaining the grounds for your appeal and including the ‘Unique ID’ contained on the penalty notice. Appeals should be made within 30 days of the date of the penalty notice. HMRC will still look at Information you provide after this date and decide whether to consider your appeal.

If you disagree with HMRC’s response, you can then ask the tax tribunal to hear your appeal.

How can we help?

We have had great success assisting clients facing PAYE penalties, as well as problems making VAT payments or being unable to pay your corporation tax bill on time and have managed to reduce the amount they owe even when faced with Security Bond joint and several requirements. If you have had an initial appeal refused and wish further advice, please get in touch with our expert team today for a free, no-obligation consultation.