Tougher tax penalty regime comes into force

Contractors who work through umbrella companies are being alerted to the introduction earlier this month of penalties for late payment of PAYE tax.

On April 6, a new penalty regime from HMRC came into force for both employers and contractors who fail to pay their monthly, quarterly or annual PAYE bill.

The regime covers the late and/or incomplete payment of tax, national insurance contributions, construction industry scheme and student loan deductions.

It replaces the Mandatory Electronic Payment (MEP) scheme, which applied to larger employers and contractors who settled up with the Revenue electronically.

However, the new penalty regime covers all employers and PAYE contractors, regardless of whether they file online or not, said tax experts at the MHH Partnership.

Under the regime, monthly and quarterly payments which are up to six months late will incur penalties, from 1% to 4% depending on the number of late payments.

Monthly and quarterly payments which are more than six months late may generate penalties of 5%, in addition to an extra 5% if payments are not made after 12 months.

And in terms of annual payments, such as Class 1A NICs, these will generate up to three penalties of 5% each, but will ultimately depend on the lateness of the payment.

In its guidance on the new regime, the Revenue said: "In most cases if you disagree with HMRC decision's, including the decision to charge a penalty, you can appeal.

"From April, HMRC has also offered the option of an internal review of tax decisions that can be appealed, with the aim of resolving issues as quickly as possible."

Also from this month, taxpayers face penalties for inaccurate tax documents/ returns across most taxes, including capital gains tax, corporation tax, VAT and PAYE.

Likewise, a penalty for failure to notify - when, say, a person doesn't tell HMRC of their self-employment within its first three months - is now in force, as are fresh penalties for 'wrongdoing.'

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