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Immediate Interest on Late PAYE

In-year interest on late payments

As from 6th April 2014, HMRC now charges interest on late payments of PAYE during the year rather than on an annual basis.

This will apply to late paid:

  • PAYE tax, Class 1 NIC and Student Loan deductions;
  • Construction Industry Scheme charges;
  • In-year late filing penalties, which start from October 2014; and
  • In-year late payment penalties, which will be charged automatically from April 2015.

Late paid Class 1A NIC will continue to be charged immediately on any amount which remains unpaid after 19th July or 22nd July if paid electronically.

Interest will be charged daily, from the date a payment is due and payable to the date it is paid in full.

For employers that pay monthly, their first payment of 2014/15 PAYE was 19th May or 22nd May for those employers who pay electronically.

Needless to say, to avoid an interest charge contractors should pay, by the due date, the difference between the following:

  • what is reported on the Full Payment Submission (FPS) received by the 19th of the month following the end of the tax month it relates to AND
  • any deductions reported on the Employer Payment Submission (EPS), again received by 19th of the month following the end of the tax month it relates to.

Where contractors make a correction on their FPS that HMRC receives after the 19th of the month following the end of the relevant tax month, the correction will be included in the following month’s charge. In these circumstances, the amount payable for the tax month is the amount actually reported by the 19th rather than the corrected amount.

Notification of an interest charge

HMRC’s Business Tax Dashboard (BTD) will be updated regularly to show the amount of any charged or repayment interest that is building up as follows:

Late payment interest (due or paid)

Will appear at the bottom of the month in which the interest charge was made.

Accruing late payment interest

Will appear at the bottom of the current tax month. Accrued interest is however only a guide as to what may be due.

Repayment interest

  • to be paid – will appear at the bottom of the current tax month
  • repaid – will appear at the bottom of the tax month in which it was repaid

*  Currently, there is an HMRC systems error which results in the BTD showing interest accruing despite the employer having submitted an EPS that clears the original charges. This error will be corrected and HMRC will not seek to collect this charge and therefore employers do not need to contact the Revenue about this.

There is no right of appeal against an interest charge but where a freelancer disputes such, then they can ask for the matter to be reviewed.

By Andy Vessey

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