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Payroll Software: Advice on PAYE late/non filing penalties and appeals

HMRC is phasing in the implementation of penalties for the late filing of PAYE, and, as part of this, has started to issue electronic generic notification service (GNS) messages to all employers, to confirm when the new in-year penalties will apply to them.

Initially messages are being sent to employers who have schemes of 50 or more employees. If you use Carval Uniwage payroll software and are to receive one of these notifications, it will appear in your "DPS" software.

Here's what you need to know:

1) Penalties

HMRC will introduce in-year penalties for failing to file PAYE submissions on time:

  • from 6 October 2014 for employers with 50 or more employees in a PAYE scheme
  • from 6 March 2015 for all other schemes

The information below sets out how penalties and appeals will apply to you from those dates depending on how many people you employ in each PAYE scheme.

When will HMRC charge a filing penalty?

They will apply penalties where:

a) a Full Payment Submission (FPS) has not been filed on or before any of the payment dates within it, and you have not told them why using the ‘late reporting reason’ field on the FPS.

b) they have not received the number of submissions they expected from you based on the employees’ pay frequency.

c) you have not filed a Nil return to inform them that you have made no payments to employees for this tax month

These rules apply to each PAYE scheme, rather than to each employer.

There is more information in the What happens if you don't report payroll information on time guidance on www.GOV.UK

How do I avoid incurring a late/non filing penalty?

You must submit an FPS each time you make a payment to an employee, on or before the payment date for that employee on the FPS.

If you don’t need to send HMRC an FPS because you did not pay any employees in a tax month, it is important that you tell them by sending a nil Employer Payment Summary (EPS) by the 19th of the following tax month. Otherwise they will assume that you have missed a submission and will therefore issue a late filing penalty.

Take note of any late and non-filing electronic Generic Notification Service (GNS) warning messages which they send to alert you that appear to be in default, and bring your PAYE affairs up-to-date – see the Using HMRC's Online Service - PAYE for employers guidance on www.hmrc.gov.uk for more information on accessing and using GNS messages.

How will HMRC charge penalties?

HMRC will charge one penalty for each tax month that you failed to file on time, the required number of times or at all. So, for example, if a PAYE scheme with weekly-paid employees sends two (or more) FPS files late within a tax month, theywill only charge one penalty.

HMRC will not charge a penalty for the first month in each tax year where you failed to file on time, the required number of times or at all. So they can charge a maximum of 11 penalties for late/non filing in a tax year. This won’t apply to the March 2015 tax month for schemes with fewer than 50 employees, which will incur a penalty if they file late for Month 12.

They will not issue a penalty to a new PAYE scheme if their first FPS is received within 30 days of making the first payment to their employee(s). But after that, normal penalties rules will apply if there is a failure to file or file on time.

The size of the late filing penalties depends on the number of employees within the PAYE scheme:

Number of employees

Amount of monthly filing penalty per PAYE scheme

1 to 9 £100
10 to 49 £200
50 to 249 £300
250 or more £400

Employers with nine or fewer employees and who meet certain conditions can take advantage of a relaxation for 2014-15 and 2015-16 (see the Sending an FPS after payday guidance on www.GOV.UK). This allows them to send an FPS about all their payments in a tax month on or before the last payday in that tax month. If you qualify for this relaxation it is important that you read the guidance that explains how to complete the payment date on your FPS.

Where an FPS is outstanding for three months or more HMRC may charge a further penalty of 5% of the tax/NICs that would have been paid if the information it provides had been sent on time. They will apply this penalty only for the most serious and persistent failures.

When and how will HMRC tell me I’ve incurred a penalty?

HMRC will send PAYE schemes a filing penalty notice by letter quarterly at the end of July, October, January and April, where penalties have been incurred. So they will start issuing the first of these notices, to schemes with 50 or more employees, from January 2015.

These penalty notices show the amount of the filing penalty for each tax month in that quarter.

The penalty notice will advise you of the penalty amount, how you can pay it and what to do if you don't agree a penalty is due.

What is the deadline for paying a penalty?

You should pay any penalty within 30 days of the date of the penalty notice. If you do not pay the amount due on time you may be charged interest.

2) Appeals – what to do if you disagree with a penalty

If you disagree with the penalty, you have the right to appeal within 30 days of the penalty notice date.

You can only appeal against a penalty notice. You cannot appeal against a GNS message, which is simply an alert to tell you that you appear to be in default.

What are the reasons I can appeal?

You can appeal if you think:

  • the penalty is not due
  • the amount of the penalty is wrong
  • you had a reasonable excuse for filing your return late

What is reasonable will be different from scheme to scheme depending on their individual circumstances. Examples of what we may and may not consider as a ‘reasonable excuse’ are set out in the Disagree with a tax decision guidance on www.GOV.UK.

If HMRC disagree on whether you have a reasonable excuse you can appeal to the Independent Tax Tribunal.

How do I make an appeal?

You can use HMRC's new Online Service to appeal online from January 2015 against late filing penalties for 2014-15 onwards.

If you appeal online, HMRC may also be able to accept and settle the appeal automatically. They will send you a GNS message to tell you if your appeal has been successful. There are further details, including the reasons you can give as grounds of appeal, in the Appeal against a penalty – new from October 2014 section of the Using HMRC's Online Service - PAYE for employers guidance on www.hmrc.gov.uk.

Alternatively, you can send your appeal in writing. Please note that your appeal will be treated in exactly the same way as if you had made your appeal on line, but it will take longer to process.

There are instructions on how to do this in the What to do if you disagree with a penalty section of the What happens if you don't report payroll information on time guidance on www.hmrc.gov.uk.

Further information

For full guidance on PAYE go to GOV.UK/running-payroll

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