July 2, 2021

How to avoid business fines: payroll edition 

Does the thought of a whopping great fine break you out in a sweat? Nothing will hurt your bottom line more than a payroll fine. But luckily, they can be avoided all together. Check out our top tips for keeping your payroll compliant and avoiding additional charges. 

According to HMRC, ‘careless behaviour’ has amounted to more than £59m in UK business fines in just one year. Ouch… 

It’s pretty serious stuff. UK income tax penalties cover a wide range of different penalties, but for starters you’ll need to be aware of three areas: 

  • Failure to meet time bound obligations. For example, submitting your documentation in time. 
  • Failure to meet a regularity obligation. For example, notifying of your taxable status. 
  • Behavioural-based penalties on inaccurate returns and documents. 

The basics on how to avoid payroll fines

Know your dates and requirements and be sure to submit your documentation to HMRC on time. You should be aware that you’ll incur late or non-filling PAYE penalties, specified charges and charges for inaccurate reporting. Whether records are manipulated purposefully, or due to error, you should be careful with the data you submit to HMRC. 

RTI and PAYE

The due dates for payments of PAYE income tax and NICs are 19th of the month or 22nd of the month (if paying electronically) following the tax month when the salary or wages payment was made to the employees. 

Need more advice on preparing for payroll year end? We’ve got you.  

Benefits in kind

Affectionately known as P11Ds. The deadline for this submission is 6 July. The penalty for not submitting P11D returns of expenses payments and benefits to HMRC is £300 initially per P11D followed by a continuing failure penalty of up to £60 per day, under section 98(1) of the Taxes Management Act 1970. So it pays to get it right! 

So, what are the rules around reporting expenses and benefits? Both P11D and P11D(b) forms should be submitted to HMRC every year at tax year end. Commercial payroll software, HMRC’s PAYE Online service or HMRC’s Online end of year expenses and benefits service can be used to submit these forms. 

National minimum wage

We’ve all heard about large brands being named and shamed on this topic. And it’s certainly one to write home about. Penalties for failing to pay the national minimum wage and living wage are harsh, at 200% of any arrears owed to the worker and a maximum penalty of £20,000 per worker.  

It’s important to note the complexities of national minimum wage and how this might impact employee pay: 

  • Not paying the right rate (e.g. missing an employee’s birthday increase) 
  • Making deductions from wages which reduces the employee’s pay below the correct national minimum wage/ living wage 
  • Including top ups to pay that do not qualify for national minimum wage/ living wage 
  • Failure to classify workers correctly, perhaps by treating them as self-employed or volunteers 
  • Failure to include all the time a worker is working (e.g. when shutting up shop, waiting to clear security or travelling between customer appointments). 

With huge complexities and fines relating to national minimum wage it pays to opt for payroll software that takes this into consideration. 

Outsource to a managed solution

Understanding and applying the latest legislation is no easy task. While great software will take into consideration the latest payroll legislation and apply it to your payroll, ultimately as an employer the onus is with you. If you lack the expertise in-house, or are simply worried about business risk it might be worth exploring the managed payroll solutions available to you. 

Want to avoid business fines relating to your payroll? Check out our guide to payroll outsourcing. 

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About the author

Diane Thames

About the author

Diane Thames

Diane Thames is a Payroll Team Manager here at Moorepay. She has been with Moorepay for over 20 years helping our customers with their payroll, and as such is a seasoned expert on everything payroll: from complicated calculations to the latest legislation.

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