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Managing payments and penalties

A recent case brought by a company showed just how unreasonable HMRC can sometimes be.

The company had consistently paid its PAYE late and so HMRC imposed penalties.  The company appealed on the basis that the penalties were excessive because payments which it had made should have been allocated to its liability for the month in which paid, rather than to its liability for the previous tax month.  On the company’s basis of allocation most of the payments were on time but the balance of its debt was quite old.  On HMRC’s basis every payment was late but the oldest debts were cleared first.  The Tribunal rejected the company’s argument on the basis that it had not made any appropriation at the time when it made the payments and so HMRC could allocate the payments to the debt.

It is important, therefore, if a business has fallen into arrears of PAYE, that it should try to avoid further penalties by ensuring that payments are first allocated to its current liability, rather than allowing HMRC to set payments against the oldest debts and continuing to rack up penalties.



Date: 1st November, 2012
Author: Cathy Corns


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