An essential part of managing a successful business of any size, optimising your payroll can be both time-consuming and difficult to achieve. 

It is important to ensure your teams are fully compliant to eliminate a risk of fines or penalties being levied against those that don’t manage to stick to long-established rules. 

So, what are payroll penalties and what considerations should there be when it comes to managing your tax?

What are payroll penalties?

If your payroll or finances are selected for review, your submission will be scrutinised thoroughly. 

And, if there are issues with the figures you submit, you can quickly find yourself at the receiving end of a payroll penalty. 

These are applied if:

  • Your submission was late, or
  • You did not send the requested and expected number of Full Payment Submissions (FPS) or you provided an Employer Payment Summary (EPS) when no employees were paid in a tax month
  • There were irregularities with your reporting

Imposed automatically by HMRC, penalties are applied when your payroll is submitted to the body with inaccuracies. 

These are broken into three distinct categories:

Careless inaccuracies: These are levied at 30 per cent

Deliberate, but not concealed, inaccuracies: These are levied at 70 per cent

Deliberate, concealed inaccuracies: These are levied at 100 per cent

How are they affected by tax?

Adding insult to injury, payroll penalties are not tax-deductible when it comes to carrying out your annual reporting. 

HMRC views any indiscretion as a formal fine, which means they should be classed as a statutory penalty. 

That makes it essential to take extra care ensuring your returns are completed correctly and in full. 

While no reliable professional would risk the fines and reputational damage that follow being found culpable of deliberately massaging or concealing their payroll, failing to fully vet your submission can result in a significant fine that would be otherwise avoidable.

While this can be easier said than done, putting in place best practice for your business infrastructure can allow you to collate your supporting documentation with ease. 

And, if you are worried about vulnerable to fines, choosing a software platform that enforces best practice and validation can ensure full HMRC compliance and no nasty surprises when it comes to receiving your returns. 

What next?

If you want to learn more about payroll penalties, and the part they play in your business, the team at Practical Software is here to help. 

With many years’ professional experience, we work with you to provide a level of care and insight that your business needs.

You can take a look at our full range of services and review our range of software and packages from here. If you have any additional questions, please do not hesitate to get in touch directly and let us know exactly what you need to resolve your payroll and taxation issues and provide the high level professional care that you need.