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HMRC internal manual

Debt Management and Banking Manual

From
HM Revenue & Customs
Updated
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Debt and return pursuit: PAYE: e-payment surcharge: examples of surcharge calculation

Examples of surcharge calculations

Example 1

Employer defaults twice in 2004/2005, once in 2005/2006, no defaults in year 2006/2007 and 3 times in year 2007/2008.

Surcharge would be calculated as follows

Tax Year Default count

value

(at tax year end) Surcharge percentage

(at tax year end) %

  228 net charge of £120K
(£10K p/month) 228 net charge of £600K
(£50K p/month) 228 net charge of £12M

(£1M p/month)

       
       
  2004/2005 2 No surcharge
(0 + 0)            
  2005/2006 3 (2 + 1) 0.17 204 1020 204000
  2006/2007   No surcharge and surcharge period ends as no defaults in the tax year      
  2007/2008 3 0.17      
(0 + 0 + 0.17) £204 £1020 £20400

Example 2

Employer defaults four times in 2004/2005, five times in 2005/2006, once in year 2006/2007 four times in year 2007/2008, no defaults in 2008/2009 and 3 defaults in 2009/2010.

Tax Year Default count

value

(at tax year end) Surcharge percentage

(at tax year end) %

  228 net charge of £120K
(£10K p/month) 228 net charge of £600K
(£50K p/month) 228 net charge of £12M

(£1M p/month)

       
       
  2004/2005 4 0.34
(0 + 0 + 0.17 + 0.17) £408 £2,040 £40,800
  2005/2006 9 1.74
(0.17 + 0.33 + 0.33 + 0.33 + 0.58) £2,088 £10,440 £208,800      
  2006/2007 10 0.58 £696 £3,480 £69,600
  2007/2008 14 3.07      
(0.58 + 0.83 + 0.83 + 0.83) £3,684 £18,420 £368,400      
  2008/09   No surcharge and surcharge period ends as no defaults in the tax year      
  2009/10 3 0.17      
(0 + 0+ 0.17 £204 £1,020 £20,400

Example 3 - worse case

Employer defaults 12 times in 2004/2005, 12 times in 2005/2006 and continues to default on all future months for all future years.

Surcharge would be calculated as follows:

Tax Year Default count

value

(at tax year end) Surcharge percentage

(at tax year end) %

  228 net charge of £120K
(£10K p/month) 228 net charge of £600K
(£50K p/month) 228 net charge of £12M

(£1M p/month)

       
       
  2004/2005 12 4.07
(0 + 0 + 0.17 + 0.17 + 0.17 + 0.33 + 0.33 + 0.33 + 0.58 + 0.58 + 0.58 + 0.83) £4,884 £24,420 £488,400
  2005/2006 24 9.96
(12 X 0.83) £11,952 £59,760 £1,195,200      
  2006/2007 36 All future years 9.96 as the default count continues to rise £11,952 £59,760 £1,195,200