Employers should note that HMRC is changing the way they charge interest on unpaid PAYE from 6 April 2014. We have reproduced below HMRC’s recent Helpsheet:
For the tax year 2014-15 onwards:
HMRC will charge in-year, rather than annual, interest on all unpaid:
- PAYE tax and Class 1 National Insurance, including specified charges (estimates HMRC makes in the absence of a PAYE submission)
- Construction Industry Scheme charges
- In-year late filing penalties, which start from October 2014
- In-year late payment penalties, which will be charged automatically from April 2015
HMRC may also charge interest on underpayments that arise because of adjustments reported on Earlier Year Updates submitted in respect of tax year 2014-15 onwards.
For annual payments such as Class 1A and Class 1B National Insurance Contributions (NICs), HMRC will continue to charge interest on any amount which remains unpaid after the due date.
Will HMRC also pay interest on overpayments in-year?
Yes. HMRC will apply repayment interest where an employer makes a payment and the charge is then reduced, and this results in an overpayment which is:
- reallocated to a later charge
- repaid
How will interest be calculated?
HMRC will charge interest from the date a payment is due and payable to the date it is paid in full.
For 2013-14 HMRC will charge interest on any amount outstanding for month 12 starting from 19/22 April 2014. Interest will only be charged on any month 12 late payment amounts and not all outstanding late payment amounts for 2013-14.
For 2014-15 HMRC will charge in-year interest each month on any late payment, starting from 19 May 2014.