Employer and Contractor Compliance – New penalty regime for late paymentsWednesday, December 9th, 2009
From the start of the 2010/11 tax year, a new penalty regime will apply to all employers who do not make their monthly or quarterly payments to the Accounts Office on time and in full. It replaces the current surcharge regime that applies only to large employers, i.e. those with over 250 employers, although large employers will still be required to pay electronically.
To advise employers of the implications of the new penalty rules, HMRC has published basic guidance notes and provided a series of “frequently asked questions”. The links are listed below.
Although it is obvious how HMRC will be able to identify late payments, it has not been clear how payments that are not made in full will be identified. At present, it is only necessary for an employer to ensure that the total payments for the year are made by 19 April, following the end of the tax year and there is no specific way to tell if a monthly or quarterly payment is less than it should be. During the consultation process on the new penalties, it was suggested that form P35 could be used by requiring employers to list the amounts that were due throughout the year. HMRC subsequently stated that that approach would not be used.
As there is no explanation in HMRC’s new documents as to how short payments will be identified, we asked HMRC to comment. We received the following response:
“You are correct that the original proposal for an additional section on the P35 was dropped. Rather than burdening all employers with an additional information requirement, we decided to adopt a method which targeted those cases where it appears from the information we hold that there may have been non-compliance.
The system we are developing will help us to bring together all the relevant information and to use it to target those cases where there appears to be a penalty liability. Potential ‘underpayers’ may well form part of this group and we may inspect employers wages records as part of this targeted approach.”
One likely indicator of an “underpayer” would be regular payments throughout the tax year but a large final balancing payment at the year end.
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