For many businesses PAYE related issues with HMRC can be the cause of many a headache. The ensuing work to get such issues resolved can be hugely time consuming and costly. The three pointers shown below will help you avoid this and make sure that all payments they receive are allocated correctly. 

The first thing to do is check your payment reference, payment account and payment date, because getting these right can save you both time and money.

Time – because if you do this, your payment should reach your HMRC account faster so there is less possibility of them needing to contact you.

Money – Paying in full and on time means they will not charge you interest or issue you with late payment penalties.

1. Use the correct payment reference

If you pay on time all you need is your 13 character Accounts Office Reference which will look similar to this example: 123PA00012345.

Don’t leave any gaps even if HMRC have left gaps in correspondence they have sent you.

Monthly Payers

The due date for ‘on time’ payments of PAYE is the 22nd of each month and should clear into your HMRC account between the 6th and the 22nd of the month following the end of the tax month to which it relates.  We find best practice here is to send your payment on or around the 18th of each month. For example April PAYE has to be paid on or before the 22nd May.

If you pay either earlier or very late (clearing after the 5th of the month following the 22nd) , you need to add an extra 4 numbers to the end of your Accounts Office reference so that they know the tax year and tax month the payment is for. (For example a payment for April 2016 PAYE sent either before the 6th May or after the 22nd May should include 1701 at the end of the reference – again with no gaps).

Remember to change or remove the extra 4 numbers if you are paying as we suggest.

The reason for 1701 is simply this – 17’ tells them it is for tax year ending 5 April 2017 and the ‘01’ tells them it is for month 1, due 22 May 2016.

Quarterly payers 

For Employers allowed to pay HMRC quarterly, an ‘on time’ payment should clear into your HMRC account in the 2nd or 3rd tax month of the quarter, or between the 6th and the 22nd of the month following the end of the tax quarter to which it relates. For example PAYE incurred in April, May and June is due for payment by the 22nd July.

If the payment is earlier, or very late (clearing after the 5th of the month following the 22nd), you would need to add an extra 4 numbers to the end of your Accounts Office reference to tell them the tax year and quarter the payment is for. But do remember to change or remove the extra 4 numbers if you are paying at the right time.

For quarterly payments sent early or late you would use 1703 for 2016-2017 quarter 1, 1706 for quarter 2, 1709 for quarter 3 and 1712 for quarter 4.

Just one final point on early or late payments – if you don’t add the additional 4 digits early payments will possibly be allocated to the previous month, late payments could be allocated to the next month meaning that to HMRC you have paid nothing for the current month you are actually intending to pay.

2. Pay in full 

This sounds simple enough, but if you don’t pay the full amount as shown on your summary document/P32 or Full Payment Submission (FPS) for the previous tax month, less any reductions from your Employer payment summary (EPS), this is likely to lead to interest charges and/or penalties.

3. Pay on time 

Your payment should clear into your HMRC account on or before the due date, which as we have stated is the 22nd of the month (if paying by post this must reach HMRC by the 19th).

Remember Bacs Direct Credit doesn’t operate on non-bank working days. If you pay by Bacs make sure your payment arrives on the last working day before the 22nd when the 22nd falls on a weekend or bank holiday.

For example, in May 2016 the electronic payment deadline of the 22nd falls on a Sunday. To make sure your payment for that month reaches them on time, you need to have cleared funds in HMRC’s account by the 20th unless you are able to arrange a Faster Payment to clear on or by the payment deadline.

Remember that it’s your responsibility to make sure that payments are made on time and as mentioned previously – if your payment is late you may be charged interest and/or a late payment penalty.

We hope you find this helpful – if you have PAYE related issues with HMRC we are happy to help you resolve them.

Want to find out more?

Call us on (01474) 853856 and we will put you in contact with one of our advisers, or send us an enquiry by clicking below.

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