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HMRC internal manual

Debt Management and Banking Manual

Debt and return pursuit: PAYE: penalties for late payment: in-year PAYE

Mandatory Electronic Payments

A large employer (also known as a segmentation band 1 employer) has 250 or more employees. For tax year 2010-11 onwards, large employers who pay late no longer face surcharges. Large employers are still required to pay electronically. Late-payment penalties may be applied if payments are made late.

Surcharges can still be issued and amended for 2009-10 and earlier, where appropriate, either clerically or automatically by BROCS.

BROCS default count

At the start of each tax year, every employer’s default count is set to zero. Towards the end of each month, checks are made to see if a payment has been made on time. Where payment was either late, not yet paid, or no nil Employment Payment Summary (EPS) was received, the default count will increase, and record a default note on the employer’s record.

Note: The first failure to pay on time does not count as a default.

Incorrect default count and note

BROCS only considers the first payment for each month to decide if a default should apply or not:

  • if the first payment was on time but a second payment for the same period is made late, the second payment will not be considered as a default by the system
  • if a payment was made on time but then reallocated in full and no further payment made, or a further payment was made late, this would not be noted as a default by the system.

However, see DMBM521050 where action can be taken to manually correct the default count.

Months cleared by reallocations

If a month is cleared by a reallocation from a payment made before the due date, the month will not be treated as late and no default count or note will be added.

PAYE late-payment penalty warning letter

HMRC may issue a PAYE late-payment penalty warning letter to employers after the first failure to pay on time each tax year.

The letter is normally only issued once during a tax year, not every time an employer fails to pay on time. HMRC issues these letters towards the end of the month and records an action history note of “Penalty Default Letter issued [date]”.

Only RLS, insolvency or deceased signals prevent letter issue.

There is no equivalent letter for annual payment charges (such as Class 1A NIC and SAFE charges, for example, Regulation 80 determinations).

Time To Pay (TTP) arrangements

There is no signal identifying TTP arrangements so a PAYE late-payment penalty warning letter may be issued for a period included in TTP. For more information, see DMBM523590.