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October 2011

PAYE late payment penalties escalating

Back in July we reported on the new PAYE penalties being issued. We have had clients affected.

Here is a news item from Tony Borman of Covertax with his experience:

HMRC appears to be on a collision course with the Tax Tribunal over automatic penalties. 

HMRC’s practice of issuing penalty notices months after the penalty has been incurred, thus leading to further penalties for taxpayers who were unaware of the problem, has come in for scathing criticism from the Tribunal recently and has been declared as contrary to UK common law.

However, HMRC seem unrepentant.

PAYE penalties for late monthly payments are now beginning to bite.  These were introduced in April 2010, but HMRC has only recently started issuing penalties.  Tax geared penalties are charged even if the payment is only 1 day late and can reach 4% of the monthly tax due. 

I am currently defending a company that received a £29,000 penalty in respect of late payments for 2010/11, most of which were only 2-3 days late, and who were unaware of the penalties clocking on.  HMRC did not issue any penalty notices during the year, but issued a year’s worth in July.

HMRC’s response so far has been to dismiss the Tribunal judgements as being specific to the particular case (even though the Judge’s analysis of HMRC’s duties under common law is clearly a comment on the system, not a particular case), to deny any obligation on them to warn taxpayers of impending penalties,  and to say that employers have no excuse for not being aware of the new penalties in view of the considerable publicity given to their introduction by HMRC at the time.  In other words, the usual customer-focussed HMRC approach!

It seems inevitable that that there will be further clashes with the Tribunal unless and until either the higher courts make a binding decision or HMRC change their practice.