Limited company contractors, recruitment agencies and umbrella companies could be in line for a series of late PAYE payment penalties, which have been introduced by HMRC from the start of this tax year.
The move has sparked controversy in some quarters as many firms will be unaware that they have incurred a PAYE penalty until as much as 12 months after the original late payment occurred.
HMRC have stated that any company missing two or more PAYE payments will be charged up to 3 per cent of the outstanding tax due. In extreme cases, this will rise to 4 per cent and sometimes as much as 5 per cent where a PAYE tax liability is not repaid by the revised ‘settlement date’ set by HMRC.
Businesses are being advised to set clear payroll structures in place and to also ensure that a PAYE payment has been received by the tax office. Where missed payments occur, audit trails may be necessary to prove the business had every intention to make the payment in the first place.
Most umbrella companies and recruitment agencies are required to make monthly PAYE payments before the 19th of each month. Limited company contractors and sole traders are able to make quarterly payments if the total of the PAYE due (income tax, employee and employer national insurance) is less than £1,500.
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