Changes to penalties incurred for late PAYE reporting

17 June 2015

HMRC has now issued the first in-year penalties notices to employers with fewer than 50 employees who missed the deadline for sending PAYE information to HMRC.

Rather than issue late filing penalties automatically when a deadline is missed, HM Revenue and Customs (HMRC) will take a more proportionate approach and concentrate on the more serious defaults on a risk-assessed basis.

This approach is in line with the likely direction of HMRC’s general approach to penalties, outlined in the HMRC penalties: a discussion document which it issued earlier this year and in HMRC’s fresh approach to considering appeals against late filing penalties for Self Assessment.

Late reporting penalties already apply to employers with 50 or more employees, so this ‘risk-based’ approach will apply to submissions that were late from:

  • 6 March 2015 for employers with fewer than 50 employees, and
  • 6 January 2015 for employers with 50 or more employees.

HMRC will continue to issue risk-based penalties for the tax year 2015 to 2016 tax year.

HMRC does not want to charge penalties, but wants employers to report on time. It wants to help employers who are trying to do the right thing, rather than penalise them.

This move to issuing risk-based late filing penalties also continues HMRC’s strategy of adapting its approach, where necessary, before moving to the next phase of implementation.

This approach will enable HMRC to concentrate more resources on the more serious failures to comply, and to focus on educating employers about their filing obligations through targeted communications, webinars and Employer Bulletin articles.

It applies in addition to HMRC’s recent announcement that it will not be penalising minor delays of up to three days. HMRC will monitor both, and review by April 2016.

Even if employers do not get a penalty, they are required by law to file on time and if they do not may be charged a penalty on a future occasion. The deadlines for sending PAYE information stay the same, including the requirement to send PAYE information on or before the time that employees are actually paid or due to be paid.

Employers can appeal electronically using the Penalties and Appeals System (PAS) on HMRC Online. Employers who receive a late filing penalty notice for tax year 2014 to 2015 quarter 4 but who filed within three days of the reporting deadline may appeal and should use reason code A as set out in the What happens if you don’t report payroll information on time guidance.


CIPP comment

Whilst some in the media may criticise HMRC for this approach, it is an approach the CIPP members favoured in the response to HMRC’s discussion document on penalties. I.e. where someone has genuine good reason for not meeting a deadline, they are not penalised, as long as they have done all they can to rectify the situation. As HMRC has said for some years, it doesn’t want yield from penalties, it wants the right money at the right time. The CIPP supports HMRC’s new approach, but would urge all employers and tax payers to prepare in time to avoid delays in meeting their obligations.