In this section:
- Penalties if you file PAYE returns late: P35, P14, P11D(b)
- Penalties for failing to file PAYE online
- PAYE/National Insurance late payment penalties
- PAYE compliance checks and penalties
- How to appeal against a PAYE penalty or surcharge
PAYE/National Insurance late payment penalties
This guide tells you about the late payments penalties which apply for all employers and contractors from May 2010.
If you have 250 or more employees, please note that these penalties have replaced the Mandatory Electronic Payment surcharge which previously applied to you.
Penalties charged are in addition to any interest that may be due.
On this page:
- PAYE/NICs payment deadlines
- Who and what late payment penalties apply to
- Notification of a late payment penalty
- Penalty rates and how they will apply
- If there's a good reason for not paying in full and on time
- What to do if you can't pay
- What to do if you disagree with a penalty
- Late tax codes for 2010 - 2011
- Technical Guidance
- More useful links
For information on PAYE/NICs payment deadlines (including student loan deduction, CIS and PSA payments) - and the interest charges you will face if you miss them, follow the link at the end of this section.
To help you avoid missing a payment deadline you can create a calendar of key tax deadlines on the Business Link website. You can also sign up to have regular email alerts as each date approaches.
The late payment penalties apply to all employers and contractors - whether you employ one or several hundred employees or subcontractors. They apply to monthly, quarterly and annual periods of PAYE starting on or after 6 April 2010.
Late payment penalties could be charged on any PAYE amount due if it isn’t paid in full on time, including
- monthly or quarterly PAYE (Pay As You Earn)
- student loan deductions
- Construction Industry Scheme (CIS) payments
- Class 1 National Insurance contributions (NICs)
- annual payments of employers' Class 1A NICs
- annual PAYE Settlement Agreements (PSA) payments
- PAYE determinations or charges raised
If a penalty is due, HMRC will send you a late payment penalty letter telling you how much you owe and when you have to pay it by. It will also tell you what to do if you think the penalty is wrong, including how to appeal.
For penalties relating to late payments that occurred in the 2010-11 tax year, HMRC will send notifications of late payment penalty charges after the end of the year. HMRC has up to two years after the late payment occurred to issue a penalty letter.
It is your responsibility to make sure that you pay on time. HMRC does not issue reminder letters.
Penalties will be charged on each PAYE scheme independently. Therefore,
if you operate more than one PAYE scheme you need to make sure that amounts
due for each individual PAYE scheme reference is paid in full on time.
The rest of this section explains how the penalties apply for different types of payment.
Monthly or quarterly PAYE payments
You will not be charged a penalty if only one PAYE amount is late in
a tax year - unless that payment is over 6 months late.
The amount of the penalty will depend on how much is late and how many times your payments are late in a tax year. So if you pay part of what is due on time then any penalty will only be charged on the part that is late. The table below shows how the penalties are calculated.
Penalty charges for late monthly and quarterly PAYE payments
|No. of times payments are late in a tax year||Penalty percentage||Amount to which penalty percentages apply|
|1||No penalty (as long as they are less than 6 months late)||Total amount that is late in the tax year (ignoring the first late payment in that tax year)|
|11 or more||4%|
Additional penalties for monthly and quarterly payments over six months late
If you have still not paid a monthly or quarterly amount in full, after six months you may have to pay a penalty of 5%. A further penalty of 5% may be charged if you have not paid after 12 months. These penalties apply even where only one payment in the tax year is late.
End of year adjustments
You may be charged a late payment penalty if you pay less than is actually due. This applies even where you pay roughly the right amount each month and then make an end of year adjustment. You should therefore make sure you pay in full each month, rather than estimate the amounts you need to pay.
However if you pay an adjustment after the end of the year under a special arrangement such as applying the Intermediaries’ rules (these are often referred to as IR35) or a formal modified PAYE arrangement known as Employment Procedures Appendix 6, HMRC will not charge late payment penalties providing the terms of the arrangement are kept.
To avoid receiving a penalty you must make certain that you pay the right amount on time each month.
Amounts due annually or occasionally
You may have to pay a penalty of 5% of the amount that is late if you have not paid the full amount by the date known as the ‘penalty date’. There’s more information about the different ‘penalty dates’ later in the section.
You may have to pay an additional 5% penalty if you have still not paid the full amount within five months of the penalty date.
You may have to pay further 5% penalty if you have still not paid the full amount within 11 months of the penalty date.
The penalty date varies according to the type of payment.
For payments such as Class 1A and 1B NICs; HMRC determinations and assessments; and amendments or corrections to returns the ‘penalty date’ is 30 days after the due date. This means that for these payments you may have to pay:
- a 5% penalty if you have not paid the full amount within 30 days of the due date
- an additional 5% penalty if you have not paid the full amount within 6 months of the due date
- a further 5% penalty if you have not paid the full amount within 12 months of the due date.
In most other cases, the penalty date is the day after the due date.
There’s a link to the Compliance Handbook in ‘Technical Guidance’ at the end of this guide for more detail on annual or occasional penalties
You won’t have to pay a penalty if HMRC agrees that there is a reasonable excuse for it being late and you paid as soon as you reasonably could after the reason for lateness ended.
What is reasonable will be different from person to person depending on their individual circumstances. However, it is normally something exceptional that you could not have predicted and that is outside your control. It is not possible to give a precise list of what is reasonable.
Some excuses that may count as a reasonable excuse
These can include:
- The death of a close relative or domestic partner around the time that payment was due.
- The payment is lost or delayed because of an unforeseen event. For example, a fire or flood at the sorting office where the payment would be held.
- Serious illness of the person or of a close relative around the time the person should have made payment.
Some excuses HMRC would not usually accept as reasonable
These can include:
- pressure of work
- lack of information
- HMRC did not remind you to pay
- ignorance of basic law
In addition, the law says that HMRC cannot usually accept as reasonable:
- Lack of money. HMRC cannot treat lack of funds as reasonable unless the shortage is due to unforeseeable events outside your control. If you are having difficulty paying there’s information in the next section ’What to do if you can’t pay’.
- Relying on someone else. HMRC cannot normally accept that you have a reasonable excuse just because you asked someone else to make the payment and they did not. Exceptionally if you have done all you reasonably can to make sure the person does make the payment on time, you may have a reasonable excuse.
For example, you may have explained carefully to the person what they have to do, and by when. You may have checked on their progress and reminded them.
If you think you have a reasonable excuse
If you think you have a reasonable excuse you should contact the office that notifies you of the penalty.
If HMRC decides you do not have a reasonable excuse, and you do not agree, you can appeal.
HMRC expects payments to be made on time. However if you are experiencing any problems in paying what you owe you can find out what to do by following the link at the end of this section.
You should contact HMRC before any payment is due if you think you will have difficulty paying on time. If HMRC agrees to allow you time to pay and you contact them before the payment is due they will not charge penalties on those payments covered by that agreement, providing you stick to the agreement.
If you disagree with the penalty, you have the right to appeal. You can appeal if:
- you don’t think a penalty is due
- you disagree with the amount of the penalty
You can also appeal against HMRC’s decision not to accept your reasonable excuse if you still think you have a reasonable excuse.
You can read more about how to appeal against a decision you disagree with in the guide 'How to appeal against an HMRC decision - direct tax'.
At the start of the tax year 2010–11 some tax code notifications, form P9, were sent out later than usual. If the tax code notification for any of your employees was not received by 6 April HMRC asked employers to use the same code they operated in March 2010. HMRC asked that all notifications, once received, be processed without unreasonable delay.
Employers who followed this guidance, and paid all PAYE monthly payments on time, have met their obligations.
In addition, there is no liability to a penalty if employers have a reasonable excuse. Whether an excuse is reasonable will depend on the merits of the case. Read the previous section ‘If there’s good reason for not paying in full on time’.