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HMRC internal manual

Debt Management and Banking Manual

From
HM Revenue & Customs
Updated
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Interest: Interest Review Unit (IRU): PAYE and National Insurance Contributions: PAYE general background

This section deals with guidance covering interest charged on

  • Pay As You Earn (PAYE) including Sub-contractors deductions scheme
  • National Insurance Contributions (NIC) [Class 1 and Class 1A])
  • PAYE and NIC Avoidance Schemes
  • Construction Industry Scheme (CIS) [formerly Sub-contractors deductions scheme]
  • PAYE Settlement Agreements (PSA
  • Intermediaries Legislation (IR35)

BackgroundWhere deductions of PAYE/SC (CIS)/NIC are not all paid to HMRC, by the due date following the end of the deduction year, interest may be charged on the late payments.

PAYE Settlement Agreements (PSA) are arrangements under which employers can settle the income tax liability in a single payment, usually on minor benefits in kind and expenses payments given to their employees.

PSA are legal arrangements between employers and HMRC and from 1996-97 they replaced ‘Annual Voluntary Settlements’, which were similar but not legal arrangements.

Where a PSA Settlement is not paid to HMRC by the due date following the end of the deduction year, interest may be charged on the late payments.

Interest charging rules

Years 1992-93 to 2004-05;Interest is charged on any deductions that are not all paid to HMRC by one of the following dates.

  • 19 April following the end of the deduction year for PAYE/NIC Class 1 and CIS (SC) deductions.
  • 19 July following the end of the deduction year for NIC Class 1A deductions.
  • 19 October following the end of the deduction year for PSA.

Year 2004-05 onwardsInterest is charged depending on the payment method used to make a payment.

Interest is charged on any deductions that are not all paid to HMRC by the following dates.

Where the payment is made by cheque:

  • 19 April following the end of the deduction year for PAYE/NIC Class 1 and CIS (SC) deductions.
  • 19 July following the end of the deduction year for NIC Class 1A deductions.
  • 19 October following the end of the deduction year for PSA.

Where the payment is made by an electronic payment method:

  • 22 April following the end of the deduction year for PAYE/NIC Class 1 and CIS (SC) deductions.
  • 22 July following the end of the deduction year for NIC Class 1A deductions.
  • 22 October following the end of the deduction year for PSA.