CH152300 - Penalties for Failure to Pay on Time: Rules for specific taxes: Pay As You Earn (PAYE) and National Insurance Contributions (NIC): Obligations: Amounts of PAYE payable following a determination where insufficient tax has been paid
Where you establish that an employer has understated its liability to PAYE or NIC on its end of year return you may have to consider making a Regulation 80 determination. COG915150+ and PAYE54000+ explain the circumstances in which a Regulation 80 determination will be considered.
This guidance also applies to Section 8 decisions for National Insurance Contributions.
See also CH152350 in relation to PAYE Settlement Agreements (PSAs).
There are also situations where a Regulation 80 determination relates to an ‘occasional amount’, for example
- one-off consultancy payments
- short term contracts, and
- irregular payments out of an Employee Benefits Trust (EBT).
In all cases where it is necessary to raise a Regulation 80 determination, and the full amount is not paid by the due date, HMRC needs to consider whether penalties are payable for failing to pay on time.
In accordance with Regulation 80(5) of the Income Tax (PAYE) Regulations 2003 the due date for payment of the amount included in the determination is 30 days from the date of the determination.
A regulation 80 determination is a legal charge that protects HMRC’s claim to PAYE due. This is not the case with Section 8 decision for NIC. The decision only provides the employer with a right to appeal against the decision. There is no statutory due date for a Section 8 decision so arguably it is the date on which the decision was issued. However, for consistency with the associated PAYE we normally treat the due date for payment as being 30 days from the date on which the decision was issued.
In accordance with Regulation 13(5) of the Income Tax (CIS) Regulations 2005 the due date for payment of the amount included in the determination is 14 days from the date of the determination.
Item 24 of the table in Schedule 56 provides that the penalty date for all assessments and determinations (which includes NIC decisions) issued where an employer or contractor has understated its liability to PAYE, NIC or CIS is 31 days after the date by which the amount should have been paid or the date on which the assessment or determination is made, whichever is later.
The amount of the initial penalty is 5% of the PAYE or NIC unpaid at the penalty date.
The employer may also be liable to further penalties based on 5% of any amount unpaid 5 months or 11 months after the penalty date.
Example
George & Williams Ltd failed to operate PAYE/NIC on payments to part time staff when they knew that those people had other employment. Amounts involved have been calculated for the years 2011-12 and 2012-13. The employer ceased co-operating and therefore the caseworker made Regulation 80 determinations and Section 8 decisions for the periods involved.
The determinations/decisions totalling £30,650 PAYE and £20,590 NIC were issued on 1 October 2013. Payment of the full amount was received on 15 December 2013.
The due date is 31 October 2013
The penalty date is 1 December 2013, that is, 31 days after the due date.
The penalty, based on the amount unpaid at the penalty date, is
£51,240 x 5% = £2,562.
No further penalties for late payment arise because the full amount was paid within 5 months of the penalty date. As a separate matter you will have to consider error penalties for those periods for which incorrect returns have been made, see CH80000+.
FA09/SCH56/PARA3