Be on time to avoid tax penalties
Businesses are being urged to ensure they avoid a ‘ticking time bomb’ on penalties for late tax payments under new rules introduced by HM Revenue and Customs.
David Bennett, a tax partner with Moore and Smalley Chartered Accountants and Business Advisors, says employers could be unaware they are accumulating the penalties under the new rules for Pay As You Earn (PAYE) tax payments introduced in May this year.
This is because penalty notices won’t be sent until the end of the tax year in April 2011, often with no prior warning that monthly penalties have been incurred.
David said: “Under the new rules firms face penalties, based on a percentage of the amount owed if they are consistently late in submitting their monthly PAYE payments.
“However, employers may get no warning that they are accumulating penalties. They may be clocking up very high charges over the year without being aware of it until the penalty notice is sent out, by which time it may be too late to limit the damage.”
Firms will be able to appeal against their liability to the penalty if, for example, the payment was not late, or there is a reasonable excuse for being late.
However, David is urging companies to avoid any potential penalties by ensuring that the monthly PAYE payments are submitted on time. Moore and Smalley is also advising companies that may need more time to make payments to contact HMRC as soon as possible.
PAYE includes payments for income tax, National Insurance contributions, Construction Industry Scheme deductions and Student Loan deductions. The payments are due on a monthly basis with a deadline of the 19th of the month, or the 22nd for electronic payments.