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Blog posts tagged PAYE
PAYE – new late-payment penalty legislation for the 2010-11 tax year
April 22, 2010
We’ve seen many new taxes come in under the radar over the past few years, but for me, this is probably the most badly thought-out, badly communicated of the lot. And once again, it’s being left to accountants and tax advisors to communicate the bad news.
If you employ staff, you’ll be familiar with the need to pay monthly PAYE and NI contributions to HM Revenue & Customs (HMRC) by the 19th of the following month.
Up until now, the legislation has been such that if you pay late, it doesn’t really matter. HMRC might write nasty letters – or even send someone round – but ultimately, there was no penalty for paying late. The trick was to get everything square by 19 May annually, and there was no comeback.
This changed on 6 April this year, when the new legislation came into effect.
Here is a brief synopsis of the new rules and penalties for those on the main monthly scheme:
- pay your monthly liability by the 19th of the month following (this is the date by which the funds must be deposited in the bank account at HMRC – so beware of paying online on the 19th. Confirm with your bank that it will get there on time);
- pay late once in any year and there’s no penalty – unless the payment is more than six months late – see below;
- pay late two-four times in any year, you’ll be fined 1% of the total amount that is late (ignoring the first late payment), so, if your monthly payment is £10,000 and on four occasions you’re a day late paying, the penalty will be 3 x £10,000 x 1% = £300;
- pay late five-seven times and you’ll be fined 2% of the total amount that is late (ignoring the first late payment);
- pay late eight-ten times and you’ll be fined 3% of the total amount that is late (ignoring the first late payment);
- pay late 11-12 times and you’ll be fined 4% of the total amount that is late (ignoring the first late payment);
- if any payment is more than six months late, you’ll have a pay a penalty of 5% of the overdue amount. If the payment is 12 months late, you will pay a further 5%.
No due reflection is given to the extent to which you’re late. If you are one day late, the penalty will apply.
From an administrative point of view, the law allows HMRC to charge penalties at any stage during the tax year, or after the end of the tax year up to two years of the due date.
In 2010-11, penalties will be charged after the end of the tax year. Therefore, penalty notices will not be sent out until April or May 2011. So please don’t test the system and think you’ve got away with it – you will get a nasty shock in April next year!
Tim Haggard is founder and managing director of My Bookkeeping Online Ltd
Organisation – the key to making tax less taxing
February 26, 2010
Tax is never a popular subject – made even less so by recent revelations that HMRC has got many of our tax codes wrong, meaning excessive charges for some. Mistakes by HRMC aside, ‘tax doesn’t have to be taxing’, as the saying goes. If small firms take the time to keep their books in order throughout the year, a mad dash at key dates in the taxation calendar can be avoided.
2010 has only just begun, so now is the perfect time to turnover a new (bookkeeping) leaf. Start by buying yourself some filing equipment, with different folders for sales invoices, paid and unpaid bills, bank statements and VAT returns, plus wages, if you have staff.
Now you have some inviting looking new folders, go through your in-tray – at least once a week – and put all your bits of paper in the appropriate place. If you set aside a small amount of time to sort out your books, weekly – or even daily – it shouldn’t become too much of a chore. Bookkeeping needs to be part of your routine, like reading emails, otherwise it can be all too easy to find something else to do instead.
Keeping accounts isn’t just sensible, it’s a legal obligation. Companies must keep all records relating to their VAT returns for a minimum of six years after the tax year to which they relate. As a minimum, you must record any income earned or expenses incurred by the company and retain all related documents, including receipts, cheque stubs, invoices, bank statements, PAYE records, etc.
To get a clear picture of where your money is going, your transactions must be recorded in a meaningful way. You should give your ‘expenses’ record a sheet of its own, with columns representing categories such as ‘rent’, ‘utilities’, ‘travel’ and ‘stationery’. This will give you an ongoing sense of where you might be over-spending, which can help you to cut unnecessary costs
Why rely on books or bits of paper when there is a wide variety of accounting software available? For a more simple and cheaper solution, an Excel spreadsheet is a perfectly useful tool for keeping records on your computer.
Keeping your records on a spreadsheet or using bookkeeping software enables you to see your total transactions in an instant. You can also search for a figure among your costs should a mystery debit appear on your bank statement and even produce projections based on the average transactions made in previous months.
You should be using your bank statements as a reference point, checking every figure in your bookkeeping records against transactions on your bank statement. This is a great way to identify missing receipts, while giving you a consistent monthly deadline to follow for getting your records in order.
Make sure you note all key deadlines for filing with HMRC. Set reminders on your computer, so you don’t have to rely on remembering to check your diary. The next one to note is the PAYE deadline on 19 May, when employers must register with HMRC to file online. HMRC is supplying free software so small businesses can file their employee data securely. For more information visit the HMRC website.
If you really can’t commit to the above, it may be time to call in an experienced bookkeeper. Of course, there will be an expense associated with this, but since it could free up your time and give you better information with which to make business decisions, it could be worth the investment.
Anita Brook is director of chartered certified accountancy firm Accounts Assist. Follow her on Twitter.
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