PAYE direct debits - interest application
The option to pay PAYE liabilities by a recurring direct debit has been available for just over a month, but there have been concerns that the arrangement will attract late payment interest. HMRC has now clarified what will happen. What do you need to know?
The new system is intended to reduce administration for employers, who would previously have to set up a new direct debit each month. However, there have been some concerns that the date the payment is taken - the 23rd of the month (or next working day if this falls on a weekend) - is later than the payment deadline for electronic payments (the 22nd).
We're aware that employers using the new system have seen a confusing message on their account showing interest accruing, and a message implying this will be collected by direct debit. HMRC clarified the mechanics of the new system at a recent Agent’s Forum. Interest will initially show, but will be reversed once the direct debit is successfully processed. If the payment fails, the interest charge will stand and accrue until payment is made. The “direct debit will collect” message is merely to show that HMRC’s system is aware that there is a scheduled payment in process and is nothing to worry about.
Related Topics
-
Should you use simplified expenses?
The flat rate expense you can claim for business journeys if you’re self-employed has increased to 55p per mile. Can you use simplified expenses for motoring costs and is it more tax efficient to do so?
-
HMRC targets smaller tax debts
HMRC is stepping up collection of lower‑value tax debts, signalling a firmer approach to long‑overdue liabilities while encouraging earlier engagement. Direct recovery from bank and building society accounts has been re‑introduced on a trial basis, alongside a government consultation on HMRC powers and tax administration. What are the key points to be aware of?
-
New digital process for NI refunds
HMRC has introduced an online service to claim a refund of Class 1 NI contributions but not everyone can use it. What can you do if you've paid too much NI?