Small firms could face PAYE penalties

Sunday 22 February 2015

HM Revenue and Customs (HMRC) is reminding small businesses that have fewer employees than 50 that they will be subject to the rules on pay as you earn (PAYE) late filing penalties from March 6th. Therefore, limited companies with one or more employees will be affected by the changes.

The taxman put this reminder in as it announced changes to PAYE information filing that are set to come in at the start of March. For example, it says that employers will not incur penalties for filing PAYE information late if there has only been a short delay of up to three days.

Late payment penalties get reviewed on a risk-assessed basis before they are issued, rather than just being sent out automatically.

In terms of deadlines, there have been no changes, so people still need to ensure information is filed on or before each payment date.

HMRC is also looking to decrease the number of unnecessary penalties it issues by closing roughly 15,000 PAYE schemes next month. These schemes are ones that seem to have stopped and have not made a PAYE report since April 2013. Before closing them, however, HMRC will be writing to the schemes to say they are planned to be closed and what needs to be done if they are still operating PAYE.

At present, HMRC is looking into ways that it can adapt the way that penalties are applied for failure to pay what is owed, to meet return or registration deadlines. It has published a discussion document and is seeking representations on the matter by May 11th.

One of the most central thoughts on the matter of changing the application of penalties is whether there should be different approaches to those who make occasional errors for genuine reasons, such as sickness for example, and those who consistently and deliberately fail to pay on time. If there should be a differentiation between the two, then HMRC wishes to know how this should be done.

After the consultation has closed, HMRC will review the responses and consider changes to the way that PAYE penalties operate by April 5th 2016.

In light of the recent changes that mean those who are up to three days late sending in their PAYE information, HMRC has said that employers who have received a late filing penalty between October 6th 2014 and January 5th 2015 for a delay of three days or fewer should appeal. They can do this online, where they should tick the box that says 'other' and add 'return filed within three days'.

Commenting on this news, Matt Fryer, compliance manager at Brookson, said: "This is a further example of increased administration being imposed on small business owners and failure to comply will result in financial penalties.  Submissions of payroll information on or before the date of payment will now become a requirement for all employers, no matter how small.  If you have an accountant they should be able to assist you with this, if you don’t you need to look into these changes ASAP”.

"If it is proving to be a challenge for you then it is well worth seeking out an accountant that has the expertise to keep on top of this for you."

By Victoria McDonnell

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