What is the payment deadline for large employers who pay by cheque?

The statutory rules governing the payment of tax and NICs to HMRC each month or quarter are set out in the Income Tax (Pay As You Earn Regulations) 2003.

Regulation 69 says that payments to HMRC must be paid

• within 17 days after the end of the tax period, where payment is made by an approved method of electronic communications, or
  
  
• within 14 days after the end of the tax period, in any other case.

Therefore, as long as payment is made by one of the approved electronic methods, the deadline for HMRC to receive cleared payments into its bank account is the 17th day following the end of each tax month or quarter, i.e. 22nd of the month, instead of the normal 19th. The time that a payment is received is presumed, unless it can be shown to the contrary, to be the time that it is recorded in HMRC's computer systems.

When the 22nd of the month falls on a non-banking day, the electronic payment must be cleared by the banking day immediately preceding that date. For example, as 22 June 2008 was a Saturday, payment was due by Friday, 20 June 2008.

Regulation 199 requires employers who are "large" employers for year-end electronic filing purposes, i.e. PAYE schemes with 250 or more employees and for which a notice to that effect has been issued before the end of December in the previous tax year, to make their payments electronically.

A strict penalty regime applies to "large" employers if HMRC receives their payments late. Regulation 201 describes a large employer being "in default" if a payment is not "received in full" by HMRC by the 22nd deadline if it is made electronically, or by the 19th deadline if it is not made electronically, e.g. by sending a cheque to HMRC. (Note that payment by cheque is an acceptable method of electronic payment if it is paid into a bank or post office with the result that HMRC receives the funds electronically.)

The expression "received in full" is carefully worded in the Regulations. A payment is only treated as being "received in full" if the whole amount of the payment is cleared for HMRC's use on the appropriate deadline date.

A large employer may, therefore, pay HMRC by sending a cheque each month by post early enough to ensure that, on receiving the cheque, HMRC has enough time to bank it and for it to be cleared by the 19th of the month. HMRC routinely banks all cheques on the same day as they are received, suggesting that a cheque posted on the 16th could be received and processed in time. An earlier posting date would be necessary if the 19th is not a banking day or if a weekend falls in between.

However, there is no certainty of a cheque being handled that promptly. As a result, there is clearly a risk of an employer being in default if reliance is placed on a cheque being received and handled by HMRC in time for it to be cleared by the 19th. This approach cannot be recommended and also makes little 'cash flow' sense.

The requirement for a cheque to be cleared by the 19th of the month does not apply to employers who are not categorised as large employers. The requirement for them is only for the cheque to be received by HMRC by the 19th. Such employers may also take advantage of the 22nd deadline for electronic payments, and the Regulations do not currently permit HMRC to impose penalties if the payments are late.

...UK Payroll News - Latest

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