Urgent update affecting PAYE remittances due 22 May 2020 if you have applied for deferral of PAYE/NIC remittances.

We have just spoken to HMRC, and they have confirmed to us that, any salary that is being wholly or partly reimbursed through the CJRS claim system will not be eligible for a payment deferral, even if a deferral has been agreed.

This is the case for any payments of PAYE tax and Class 1 NIC due to be paid in respect of furlough payments made in Month 12 of 2019/20 and Month 1 of 2020/21 onwards. Therefore, this will affect any payments due from today, the 22nd May onwards.

This will affect you if you have:

  • Made arrangements with HMRC to defer your PAYE payment obligations arising on 22 May 2020 onwards following the impact of the COVID-19 virus, and;
  • Made a claim for reimbursement of furlough pay/NIC/pension from HMRC under the CJRS for those employees that have been placed on furlough.

Therefore, if you have not requested a deferral to make payments of PAYE/NIC payments to HMRC, or if you have not made any claims to HMRC under the CJRS, this issue will not affect you.

What you can and cannot defer

As under the CJRS arrangement, employers are being reimbursed an element, or all of, the relevant employees’ gross salary and associated Employers Class 1 NIC, HMRC state that those payments will not be eligible for deferral under the terms of any deferral agreement made.

This is the position even where an employer entered into a PAYE/NIC deferral arrangement prior to the implementation of the CJRS.

For example:

  • In March 2020, a business enters into an agreement with HMRC to defer its PAYE/NIC payments until July 2020.
  • That business later makes a CJRS claim of £40,000 towards its monthly April salary costs of £85,000.
  • In those circumstances, the PAYE & Class 1 NIC (employers and employees) arising in relation to the £40,000 must be paid over to HMRC by the 22 May as per the usual statutory due date.
  • The PAYE & Class 1 NIC due in respect of the remaining £45,000 can continue to be deferred.

HMRC have advised us that any PAYE tax/NIC remittances due on furlough payments made from the date the CJRS was introduced on 19 March 2020 are due to be paid by today, 22 May 2020. So, the remittance deadline for all furlough payments made from 19 March 2020 to the end of April 2020 is today, 22 May 2020.

Any deferral agreement with HMRC in respect of PAYE tax/NIC remittances is only in place for the salaries that are not paid under the CJRS as furlough pay.

What are the potential consequences of not making a payment to HMRC?

Any payment failure could be regarded by HMRC as a ‘payment default’. Payment defaults can lead to a number of significant issues for an employer, including:

  • Tax geared late payment penalties. The level of potential penalty is based on three key factors;
    • the amount of tax unpaid;
    • the number of other payment defaults in the tax year, and;
    • how long the liability remains unpaid.
  • The potential creation of a poor compliance payment record. This can affect issues such as applications for, or losing the benefit of, Gross Payment Certificates for the Construction Industry Scheme.

In the event of a penalty notice being issued, in relation to the late payment of PAYE/NIC, you will still be able to make an appeal against that penalty on the basis that you had a “reasonable excuse” for the failure.

If you have any questions about this issue, or any other questions relating to the CJRS furloughing scheme, or Employment tax issues, please contact a member of Smith Cooper’s Employment Tax team.