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Schedule 56 Finance Act 2009 introduced a system to penalise late payment of PAYE. It has become clear that recently many employers have been subjected to penalties from this harsh system, many who have acted in good faith and do not constitute ‘bad payers’ that are taking advantage of the system. Employers who pay late (even by only a few days) should receive a default notice warning that further late payments will incur penalties.

Employers having difficulty paying on time need to contact HMRC as soon as possible (see link http://www.hmrc.gov.uk/payinghmrc/problems/cantpay.htm ). A full explanation of why the payment cannot be made should be provided, and then an agreement should be made as to how and when it can be paid. Remember to write a detailed note of the conversation and take the name of the person you are speaking to for the note. Penalty charges are automatically generated by HMRC’s computer system so in the event you need to appeal these penalties (due to the fact you had an agreement with HMRC) you can then present a note of your telephone conversation to strengthen your appeal.

HMRC are resisting cash flow problems as an excuse for late payment and will no doubt be pleased with this regime bringing about faster payment of PAYE. As long as full cooperation and a continued dialogue is kept open with the relevant department in HMRC then these harsh penalties should be able to be avoided.

Please contact paul@avnvenustax.co.uk if you have any queries.