From late in the tax year 2014/15 HMRC will be charging penalties on employers who report their payroll information later than the due date. The date of introduction of the penalties is staggered depending on the size of the workforce.
Penalties will apply from 6/10/2014 for employers with 50 or more employees, and from 6/3/2015 to all other employers.
How do the penalties for late filing work?
Penalties can be charged where: the Full Payment Summary (FPS) is late; or you don’t send the expected number of FPSs; or you didn’t send an Employer Payment Summary (EPS) in a tax month when you didn’t pay any employees. Penalties will not be charged if: it’s your first late report of the tax year, or if you’re a new employer and you sent your first FPS within 30 days of paying an employee.
The size of the monthly penalty depends the size of the workforce: i.e. the penalties for each band of employees is as follows: 1-9, £100; 10-49, £200; 50-249, £300; 250+, £400. If you’re over 3 months late you can also be charged a further penalty of 5% of the tax and National Insurance that should have been reported on time.
The taxman will send penalty notices in July, October, January and April. Penalties are payable within 30 days: with interest charged for late payment. From October 2014, appeals can be made online. The main grounds of appeal are likely to be that HMRC have made an error (e.g. the return was filed on time), or that you had a “Reasonable Excuse” for not being able to file on time.
What else happens if I don’t file on time?
If either: you don’t send your FPS on time or inform HMRC that you haven’t paid any employees (by sending an EPS), they may raise a “Specified Charge “, i.e. an estimate of how much HMRC thinks you should pay -based on your previous PAYE payment and filing history. A Specified Charge doesn’t displace the requirement to submit a FPS or EPS. Only by sending the missing FPS or EPS with the due tax for that month can the Specified Charges be dislodged. HMRC say that “If instead you send in updated year to date figures in your next FPS, the Specified Charges will remain in place, but your accounting record will be adjusted – to reflect the year to date figures supplied in the later month”.
What are the penalties for errors?
In addition to the late filing penalties, there are also the normal tax geared penalties where the returns are incorrect due to an error. No penalties are charged for errors in cases where reasonable care was taken. In cases where insufficient care was taken the penalties can still be reduced to nil by making a full and unprompted disclosure to HMRC. Penalties get proportionately higher for cases of “Careless error”, “Deliberate error”, and “Deliberate error with concealment”, and also in cases of “Prompted disclosures”, and poorer quality disclosures. The maximum penalty can be up to 100% of the tax underdeclared – and 200% in cases where offshore bank accounts are involved.
How can Lynam Tax Investigation Experts help me?
Lynam Tax partners have a vast amount of practical experience in managing tax investigations and tax enquiries. We can advise you on the best course of action and if appropriate, help you manage any necessary disclosures, in order to obtain the optimum outcome for you, your business and your family.
*For a free, private, no obligation consultation, call Paul Lynam today on 0845 643 9997
or Andrew Nutbrown on: 07718 778710