PAYE penalties set to be levied, expert warns

Date: 6th June 2011

A number of small businesses in the UK could be encouraged to seek the assistance of a specialist tax accountancy service following the recent comments of one expert.

Writing for industry publication accountingWEB, Rebecca Benneyworth warned that while HM Revenue & Customs' (HMRC) new PAYE penalty system was launched more than a year ago, businesses are only now beginning to be landed with fines for late payment.

The expert claimed that the delay is due to the way the penalties are calculated and claimed it will remain unclear how the new regime will work in practice until real-time information is available to HMRC.

Ms Benneyworth explained that penalties on payroll taxes are now dependent on the number of defaults from any one firm in a tax year.

While there is no penalty applied to the first missed or late payment, provided it is the only default of the year, there are fixed penalties for subsequent offences.

Businesses that default two, three or four times will be liable to a penalty of one per cent of the total of the defaults, including the first missed payment.

For between five and seven occurrences the penalty increases to two per cent and between eight and ten defaults will attract a penalty of three per cent.

Thereafter, a penalty amount of four per cent will be added to the total amount owed.

Posted by Jacob Williams