Prospect of Late Filing and Late Payment Penalties for Payroll, RTI, FPS

Warning: Real Time Information (RTI), Full Payment Submission (FPS), and the Prospect of Late Filing and Late Payment Penalties for Payroll

October 2014 is fast approaching. On this date you must be ready to submit Full Payment Submission (FPS) each time you make a payment to an employee.

Recording and submitting your payroll liability

Automatic in-year late filing penalties will kick in on October 2014 for all UK employers (and pension providers) that fail to notify HMRC of their PAYE liability at the time or before they make a payment to their employees. The information must be collated and sent to HMRC via the Government Gateway.

A Full Payment Submission (FPS) must be sent via the Government Gateway each time you make a payment to an employee. The final FPS for an employee should be sent on or before their last pay day in the tax year and will be used to update the individuals’ tax, NICs, and student loan deduction records.

What if you haven’t paid anyone anything?

If you have not paid any employees in a tax month, and therefore have no FPS to send to HMRC, you must still notify HMRC by sending an Employer Payment Summary (EPS) by the 19th of the following tax month. If you fail to submit your FPS on time, or fail to inform HMRC by sending an EPS that you have not paid any employees in the tax month, an estimated charge (known as a "specified charge" will be raised by HMRC for each tax month that you fail to send a RTI submission.

What are the rules if you have fewer than nine employees?

Existing employers with nine or fewer employees can report PAYE information on or before the last payday in the month until April 2016. Although this is another "relaxation" of the new rules, it still means PAYE information must be reported on or before the date employees are paid. Full RTI reporting will commence from April 2016.

All new employers, as well as existing employers with ten or more employees, must report PAYE information using RTI.

Late filing Penalties

From October 2014 late filing penalties will apply to each PAYE scheme, with the size of the penalty based on the number of employees in the scheme.Monthly penalties of between £100 (for one to nine employees) and £400 (250 or more employees) will apply to micro, small, medium and large employers.

There is no change to the penalties for late filing of returns for the tax years 2012/13 and 2013/14. The current penalty regime will continue to apply at the year end.

Paying anything due to HMRC

From April 2014, HMRC send only one warning letter the first time in the tax year they think your PAYE payment is late.

No PAYE/NICs to pay? Avoid warning letters and payment reminders

If you have no PAYE/NICs payment to make for a month or quarter, to avoid an unnecessary warning letter or payment reminder, you must inform HMRC on or before your normal payment date that no payment is due by using an Employer Payment Summary (EPS).

The penalties for late payment

Penalties are charged on each PAYE reference number (also called a "PAYE scheme"). Anyone operating more than one PAYE scheme must make sure that amounts due for each individual PAYE scheme reference are paid in full and on time.

The total penalty charged can be made up of a number of items:

• A default penalty, for failure to pay monthly/quarterly payments on time and in full;
• Penalties for amounts still unpaid after six and twelve months;
• Additional penalties for amounts charged annually or occasionally.

Monthly or quarterly PAYE payments

You will not be charged a penalty if only one PAYE amount is late in a tax year, unless that payment is over six months late.The amount of the penalty will depend on how much is late and how many times your payments are late in a tax year. The penalties are calculated, as follows:

• If you make between 1 and 3 late payments you will be charged 1% of the total amount that is late in that tax year;
• If you make between 4 and 6 late payments you will be charged 2%;
• If you make between 7 and 9 late payments you will be charged 3%;
• And for 10 and more 4%.

Remember that payment is due on the 19th of each month: a penalty of 5% applies to amounts unpaid for more than six months after the penalty date and a further penalty of 5% applies after 12 months.

Daily interest will continue to accrue on all unpaid amounts from the due and payable date to the date of payment.

What you should do

Make sure you are ready for October 2014 if you process payroll inhouse. If you’re not sure, contact your account manager immediately to discuss. If DNS manage your payroll already, make sure you always update us of any changes; if you would like to discuss DNS managing your payroll, please contact us to arrange.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.