Small businesses 'may be unaware' of HMRC fines

Date: 16th April 2010

Smaller businesses in the UK could find that more than 12 months has passed before they are aware they have been charged with a penalty for late payment of PAYE.

This is the view of the Ross Martin Tax Consultancy following new HM Revenue & Customs (HMRC) penalties, which came into effect on April 6th.

HMRC has set out the structure of the new fining system on its website.

The department has explained that there will be no penalty for instances of one late payment as long as the employer is less than six months late.

However, those who are late two to four times, five to seven times and eight to 10 times in one year will face penalty charges of one, two or three per cent respectively.

Those who are late on 11 or more occasions will face a penalty of four per cent of the unpaid amount, HMRC explained.

Additional penalties of five per cent will also be added if original penalties are not paid by the "penalty date" stipulated in HMRC's correspondence.

Businesses should be encouraged by the new system to ensure they have a clear process for paying PAYE and any subsequent fines, according to Ross Martin.

"The employer should create adequate systems so that it can confirm when a payment is made, should it be necessary to appeal penalties at a later stage [as] increasing penalties have the potential to make a company insolvent," the firm said.