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HMRC internal manual

Debt Management and Banking Manual

Debt and return pursuit: PAYE: penalties for late payment: penalty legislation

The supporting legislation for these penalties is Schedule 56 Finance Act 2009. The table below lists the relevant parts of that legislation.

  • Para 1 shows the date after which the penalty is incurred for. For in-year PAYE:
    • employers who pay monthly/ quarterly - the due date is the 19th or 22nd of the month or quarter depending on payment method and frequency of payment
    • employers who pay their PAYE annually - the due date is the 19th or 22nd of the month (depending on payment method) on which their annual payment is expected
    • regulation 80 (PAYE), Regulation 13 (CIS) and section 8 NIC decisions - the due date is 30 days after the date the determination was raised or the decision was made
    • class 1A NIC - the due date is the 19 or 22 of July following the end of the tax year
    • PAYE Settlement Agreements - the due date is the 19 or 22 October (depending on payment method) following the end of the tax year.
  • Paras 3-8 show the percentage rates of the penalties.
  • Para 9 provides HMRC with discretion to reduce a penalty because of special circumstances. An inability to pay is not a special circumstance.
  • Para 10 allows HMRC to suspend the penalty during a payment deferral agreement (i.e. time to pay or payment in full within an agreed timescale) - see CH156600.
  • Para 12 shows the time limit for charging penalties. For In year PAYE the time limit is two years from the due date. For annual charges (such as Reg 80) the time limit is the later of one year from the end of the appeal period or two years from the due date.
  • Para 13 allows the employer to appeal against any penalty raised.
  • Para 16 allows for an employer not being liable to a penalty if they satisfy HMRC that they had a reasonable excuse for the failure.

Schedule 11 (Appointed Day) Order 2010 Finance (No. 3) Act 2010 clarified Schedule 56 Finance Act 2009 (c.10) in relation to income tax. It made clear:

  • that HMRC can raise these penalties on a PAYE charge as a whole, and do not have to break this down into it’s individual components of Tax / NIC / CIS and Student Loans
  • the penalty charging date for certain annual PAYE charges.