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At a glance: HMRC PAYE late filing penalties and appeals

1 July 2014 by Crystal HR & Payroll Ltd

Pay As You Earn

At a glance: late filing penalties and appeals
1) Penalties

HMRC will introduce in-year penalties for failing to file PAYE submissions on time from 6 October 2014. You should therefore make sure that all submissions due for all of your PAYE schemes are fully up to date by 5 October 2014.

When will HMRC raise a filing penalty?

HMRC will apply penalties:
a)  where a Full Payment Submission (FPS) has not been filed on or before the date you paid your employees, or where you have not told us why the submission is legitimately late by using the late reporting reason field.
b)  where we have not received the expected number of submissions from you.

These rules apply to each PAYE scheme, rather than each employer.

There is more information in the What happens if you don’t report payroll information on time guidance

 How do I avoid incurring a late filing penalty?

You must submit an FPS each time you make a payment to an employee, on or before the date that you pay them.

If you don’t need to send us an FPS because you did not pay any employees in a tax month, it is important that you tell us by sending a nil Employer Payment Summary (EPS) by the 19th of the following tax month. Otherwise, it is likely that we will assume that you have missed a submission and will therefore issue a late filing penalty, which you will have to appeal.

To help get your PAYE up-to-date and avoid future penalties, you should take note of any late and non-filing electronic Generic Notification Service (GNS) warning messages which we send to help you get your PAYE affairs up to date – see the Using HMRC’s Online Service – PAYE for employers  guidance for more information.

Need Help?

How will HMRC charge penalties?

We will charge one penalty for each tax month that you failed to file on time. So, for example, if a weekly filer makes two (or more) returns late within a tax month, we will only charge one penalty.

We will not charge a penalty for the first month in each tax year where you failed to file on time. So we can charge a maximum of 11 fixed penalties for late filing in a tax year.

We will not issue a penalty to a new employer if their first FPS is received within 30 days of making the first payment to their employee(s). But after that, normal penalties rules will apply if there is a failure to file on time.

Employers with nine or fewer employees and who meet certain conditions can take advantage of a relaxation for 2014-15 and 2015-16 (see http://www.hmrc.gov.uk/payerti/transitional.pdf). This allows them to report PAYE information about all their payments in a tax month on or before the last payday in that tax month. If you qualify for this relaxation it is important that you read the guidance that explains how to complete the payment date on your FPS.

The size of the late filing penalties depends on the number of employees within the PAYE scheme.
Number of employees                            Amount of the monthly filing penalty per PAYE scheme
1 to 9                                                                           £100
10 to 49                                                                     £200
50 to 249                                                                 £300
250 or more                                                            £400

Where a return is late for three months or more we may charge a further penalty of 5% of the tax/NICs that would have been paid if the information it provides had been sent on time. We will apply this penalty only for the most serious and persistent failures.

 When and how will HMRC tell me I’ve incurred a penalty?

We will send employers a filing penalty notice by letter quarterly at the end of July, October, January and April, where penalties have been incurred.

These penalty notices show the amount of the filing penalty for each tax month in that quarter.

The penalty notice will advise you of the penalty amount, how you can pay it and what to do if you don’t agree a penalty is due.

 What is the deadline for paying a penalty?

You should pay any penalty within 30 days of the date of the penalty notice. If you do not pay the amount due on time you may be charged interest.

2) Appeals – what to do if you disagree with a penalty

If you disagree with the penalty, you have the right to appeal within 30 days of the penalty notice date.

 What are the reasons I can appeal?

You can appeal if you think:
the penalty is not due

the amount of the penalty is wrong

you had a reasonable excuse for filing your return late

What is reasonable will be different from employer to employer depending on their individual circumstances. Examples of what we may and may not consider as a ‘reasonable excuse’ are set out in the If there’s a good reason for not filing on time section of the ’What happens if you don’t report payroll information on time’ guidance.

If we disagree on whether you have a reasonable excuse you can appeal to the independent Tax Tribunal.

How do I make an appeal?

You can use HMRC’s new Online Service to appeal online from October 2014 against late filing penalties for 2014-15 onwards.

If you appeal online, HMRC may also be able to accept and settle the appeal automatically. HMRC will send you a GNS message to tell you if your appeal has been successful. There are further details, including the reasons you can give as grounds of appeal, in the Appeal against a penalty – new from October 2014 section of the Using HMRC’s Online Service – PAYE for employers guidance.

Alternatively, you can send your appeal in writing. Please note that your appeal will be treated in exactly the same way as if you had made your appeal on line, but it will take longer to process. There are instruction on how to do this in the What to do if you disagree with a penalty section of the What happens if you don’t report payroll information on time guidance.

You can read more about how to appeal in the How to appeal against an HMRC decision – direct tax guidance.

 Further information

For full guidance on reporting PAYE in real time go to hmrc.gov.uk/payerti/index.htm

For help with penalties get in touch.

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