The taxman is “cynically” delaying informing businesses that they have been late to file their Pay As You Earn (PAYE) tax submissions in order to increase the size of penalty payments, according to an accountancy firm.
Carter Backer Winter (CBW) warned that HM Revenue & Customs’ penalty regime for employers who are late to pay their monthly PAYE liabilities “creates an incentive” not to warn businesses of overdue submissions.
The size of fines increases depending on the number of times a company is late. Andy White, a tax partner at CBW, said that HMRC is “deliberately not issuing penalty notices” for initial late submissions so companies qualify for larger penalties later on.
HMRC has been chastised by a judge in a tax tribunal for “deliberately [delaying] sending out a penalty notice for several months knowing that the effect would be to impose a maximum penalty”.
Mr White said: “It’s indicative of a general change of approach from HMRC, using underhand techniques to exploit the law in their favour – exactly the kind of thing the Government is saying that’s unacceptable from taxpayers.”
He said one client who has challenged the lack of warnings from HMRC over late filings was told that the taxman had contacted him by phone to warn of an overdue submission.
“That’s not true – he was out of the country. They’re also saying there were warning letters, but they can’t produce the evidence. A lot of accountants are experiencing similar problems. It… particularly affects small businesses.”
Mr White submitted a Freedom of Information request asking for information on how many PAYE penalties were issued and when they were generated. It was rejected on the grounds that disclosure could “undermine the effectiveness of the penalty regime”.
A HMRC spokesman said: “The vast majority of employers pay their PAYE on time and for the few who fail to pay, we send reminders and make telephone calls to remind them of their obligations and the consequences of failing to pay, including penalties. We use these PAYE penalties purely to encourage on–time payment and protect employees whose tax and national insurance it is.
“Individual circumstances are fully taken into account in deciding a ‘reasonable excuse’ for missing a deadline and we apply the rules fairly and with consideration.”
Carter Backer Winter (CBW) warned that HM Revenue & Customs’ penalty regime for employers who are late to pay their monthly PAYE liabilities “creates an incentive” not to warn businesses of overdue submissions.
The size of fines increases depending on the number of times a company is late. Andy White, a tax partner at CBW, said that HMRC is “deliberately not issuing penalty notices” for initial late submissions so companies qualify for larger penalties later on.
HMRC has been chastised by a judge in a tax tribunal for “deliberately [delaying] sending out a penalty notice for several months knowing that the effect would be to impose a maximum penalty”.
Mr White said: “It’s indicative of a general change of approach from HMRC, using underhand techniques to exploit the law in their favour – exactly the kind of thing the Government is saying that’s unacceptable from taxpayers.”
He said one client who has challenged the lack of warnings from HMRC over late filings was told that the taxman had contacted him by phone to warn of an overdue submission.
“That’s not true – he was out of the country. They’re also saying there were warning letters, but they can’t produce the evidence. A lot of accountants are experiencing similar problems. It… particularly affects small businesses.”
Mr White submitted a Freedom of Information request asking for information on how many PAYE penalties were issued and when they were generated. It was rejected on the grounds that disclosure could “undermine the effectiveness of the penalty regime”.
A HMRC spokesman said: “The vast majority of employers pay their PAYE on time and for the few who fail to pay, we send reminders and make telephone calls to remind them of their obligations and the consequences of failing to pay, including penalties. We use these PAYE penalties purely to encourage on–time payment and protect employees whose tax and national insurance it is.
“Individual circumstances are fully taken into account in deciding a ‘reasonable excuse’ for missing a deadline and we apply the rules fairly and with consideration.”