In this age of fiscal discipline, controlling cash flow and bad debts is as vital to government finances as it is to businesses so it comes as no surprise that HMRC is in the process of introducing its Real Time Information (RTI) system to immediately pick up on employers who are either being just plain slapdash or are heading for serious financial trouble. All too often, the Exchequer either has had to wait for late PAYE payments or to wait at the head of the queue of creditors when companies went into liquidation. The total cost is substantial enough for HMRC to introduce this much tougher regime and one leading provider of business tax services, Baker Tilly, has been busy warning clients of what they need to do to avoid unnecessary penalties.
Make no mistake about it, those at the top of the business tax services industry insist that the taxman is determined to reverse a situation wherein he loses interest on late payers of PAYE into one where he earns interest from them and it doesn’t matter what the reason is; business tax services providers are making it clear that simple laziness or cash flow difficulties are not legitimate excuses and that the Revenue expects to be paid pretty much at the same time as employees.
Business tax services professionals say that the best way of avoiding automatic penalties and interest is to ensure that PAYE payments are made by the due date every month and that returns are also submitted on time. They remind employers that PAYE deductions should arrive at HMRC within 14 days of the end of each period i.e. by the 19th of the following month in the case of cheques while an extension until 22nd of the month is allowed for the arrival of cleared funds sent by BACS transfer. The same business tax services experts also stress that, where the 19th of the month falls on a weekend, it is not acceptable to wait until the beginning of the next week.
At least it looks as though HMRC is being reasonable and accepts that the lack of employer awareness and the inevitable glitches in the RTI system that seem to accompany any new change by the Revenue could lead to a major backlog of penalties and appeals to the tribunals. Accordingly, business tax services firms point to the fact that the RTI automatic penalty regime is being phased in gradually over a period of time. Moreover, a new generic notification service (GNS) is being introduced to forewarn employers of impending trouble.
Currently HMRC only charges penalties on an annual basis once it has seen how many late payments have occurred during the previous year. However, business tax services advisers are warning that, from April 2015, the system changes up a gear so that late payment penalties will be calculated on a quarterly basis with interest charges varying from 1% to 4% of the sums paid late with seriously late payers being slapped with an extra 5% or even 10%.
In view of the potential for enduring such harsh penalties it is no surprise to see accountants and other business tax services urging clients to not only pay on time but also to get into the habit of checking their tax account in the Liabilities and Payments Viewer or tax dashboard every month. This should help them ensure that all payments have been entered correctly and that any interest charges are accurate.
Finally, employers are urged by the business tax services experts not to overlook the fact that automatic penalties will also be applied in the event of late filing of PAYE returns from October 6th 2014 although, if the system works correctly, the GNS should forewarn employers of potential late filings.
If you need advice about PAYE regulations, or any aspect of taxation, Baker Tilly has a team of experts who specialise in business tax services ready to help you.