Any employer who completes PAYE returns is no doubt aware of the penalty implications for persistent late payment of PAYE and NI. However, in the event that you find yourself in a tax year where you may be making more than one late payment are you aware that requesting your own allocation of the PAYE payments may have an impact on penalties?
PAYE is a debt to HMRC and they normally allocate PAYE payments automatically to reduce the earliest debt first. Therefore if you pay all 12 PAYE payments in a tax year five days after the due date, then you have 12 late payments for penalty purposes resulting in a 4% penalty percentage. However if you write to HMRC and inform them, before payment, how you would like the payment to be allocated the result could be very different.
Instead you could state that a payment is an early payment for the current month.
HMRC’s online guidance states:-
“If you send your payment to HMRC earlier or later than they expect it you will need to tell them the year and month your payment relates to so that they can correctly allocate it to the period you are paying.”
Therefore you could state that the first payment of PAYE was an early payment for month 2. If this is continued throughout the year you would have 11 early payments and only 1 late payment, which changes the penalty percentage to 1%.
If you would like further information or assistance on the rules surrounding PAYE payment please give us a call on 01733 371180.