PAYROLL INSIGHT
Employment taxes: payroll penalties
Justine Riccomini ChFCIPP, head of taxation (Scottish Taxes, Employment and ICAS Tax Community) for ICAS, discusses the sanctions employers face
T he term ‘employment taxes’ cover many different areas: pay as you earn (PAYE), benefits in kind, and National Insurance contributions (NICs) (as well as the construction industry scheme). The national minimum/living wage (NM/LW) regulations complicate matters further, because whilst they are not tax-based they are administered and enforced by HM Revenue & Customs (HMRC). Although the UK’s income tax penalty regime covers many different penalties, these are the three broad areas: ● penalties for failing to meet a time- bound obligation, such as submitting a return or making a payment by a specified deadline ● penalties for failing to meet a regulatory obligation such as notifying taxable status Penalties can be charged when a real time information (RTI) full payment submission (FPS) was not sent in on time, or HMRC was expecting a different number of FPS returns, or the employer payment summary (EPS) was not submitted even where there are no employees. Penalties for late submissions, which are set out in section 106 and schedule 55 to Finance Act 2009 (FA 2009), are based on the number of employees. The first failure is overlooked as is the late receipt (as long as within thirty days) of the first FPS by a new employer. Second and subsequent failures are penalised as shown in Table A. The due dates for payments of PAYE ● behavioural-based penalties for submitting inaccurate returns and documents. RTI and PAYE
income tax and NICs are 19th of the month or 22nd of the month (if paying electronically) following the tax month when the salary or wages payment was made to the employees. ...UK’s income tax penalty regime covers many different penalties... Failure to pay PAYE and NICs on time incurs penalties under the provisions set out in section 107 and schedule 56 to FA 2009, as shown in Table B. When payment issues arise, it may be possible to enter into an agreement with HMRC to defer the payment of taxes, and without being liable to certain surcharges or penalties that would otherwise be due because of late payment. This is usually referred to as a ‘time to pay (TTP) agreement – and the conditions attaching to it are that, first, it must be entered into before the due date and, second, it needs HMRC’s agreement in writing. Generally, a TTP is seen by HMRC as a temporary measure and, needless to say, if there is a TTP in place but the payment terms are not kept to, the penalties come back into
charge (section 108, FA 2009). Failure to submit mandatory e-filing returns of any kind are punishable with a penalty in accordance with the Income Tax (Pay As You Earn) Regulations 2003. Benefits in kind The penalty for not submitting P11D returns of expenses payments and benefits to HMRC by the 6-July deadline following the tax year in which the benefits were received is £300 initially per P11D followed by a continuing failure penalty of up to £60 per day, under section 98(1) of the Taxes Management Act 1970. Class 1A NICs which become due on the benefits are payable by 19 July (22 July for electronic payment) following the 6 July deadline. If this is not paid, penalties and interest can become payable, starting with a penalty of £100 per fifty employees or part thereof for the first twelve months. This penalty is capped at the value of class 1A NICs outstanding. If the return is still outstanding more than twelve months after it initially became due, a further penalty not exceeding the total class 1A NICs becomes due. A surcharge of five percent of the NICs due can be applied after 31 days, six months and twelve months respectively under regulation 67B of the Social Security (Contributions) Regulations 2001.
Table A: Penalties for late submission of FPSs 1–9 employees £100 10–49 employees £200 50–249 employees £300 250+ employees £400 Failure continues for more than three months
5% of the tax due
| Professional in Payroll, Pensions and Reward | December 2018 / January 2019 | Issue 46 24
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