HMRC is urging all taxpayers, and particularly employers, to pay their tax labilities by electronic means rather than by cheque. HMRC officers have been calling and writing to employers who still pay by cheque, to ask them to switch to online or telephone banking, to pay by debit or credit card online.
HMRC has been trying to reassure taxpayers that electronic payment is safer and more secure than a cheque sent through the post, as it avoids the risk of the physical cheque being intercepted and fraudulently cashed. However, electronic payments are also at risk of misdirection if a mistake is made when typing the bank details or payment reference.
The easiest way to pay VAT is to set up a direct debit. This allows HMRC to take the amount due from the trader’s account 10 days after the end of the month that follows the end of the VAT quarter. The correct amount will then be collected by HMRC on time, if there are sufficient funds in the account, until the direct debit is cancelled.
However, this doesn’t work for PAYE. The employer can set-up a direct debit to pay PAYE, but it only for one single payment. The employer has to set-up a new direct debit for each PAYE payment due, using the 13-character accounts office reference number, and enter the year and month for the particular payment. As it takes 3 to 5 days for the employer’s bank to communicate the direct debit details to HMRC, it is just not worth the hassle.
The employer needs to remember to pay the PAYE due by 22nd of each month, if paying electronically. This month the due date falls on a Sunday, so the funds need to reach HMRC by Friday 20th January, unless the bank will process a faster payment at a weekend. Not all banks will allow an advance payment to be scheduled for a weekend or bank holiday.
Employers who have less than £1500 to pay in PAYE per month, can ask to pay the PAYE quarterly. The payment for the third quarter of the 2016/17 year is also due by 22 January 2017.
If the employer has paid PAYE electronically on one or more occasions in 2016/17 they won’t be sent a PAYE employer payment booklet for 2017/18.
Written by the Tax Advice Network