PAYE direct debits - interest application
The option to pay PAYE liabilities by a recurring direct debit has been available for just over a month, but there have been concerns that the arrangement will attract late payment interest. HMRC has now clarified what will happen. What do you need to know?
The new system is intended to reduce administration for employers, who would previously have to set up a new direct debit each month. However, there have been some concerns that the date the payment is taken - the 23rd of the month (or next working day if this falls on a weekend) - is later than the payment deadline for electronic payments (the 22nd).
We're aware that employers using the new system have seen a confusing message on their account showing interest accruing, and a message implying this will be collected by direct debit. HMRC clarified the mechanics of the new system at a recent Agent’s Forum. Interest will initially show, but will be reversed once the direct debit is successfully processed. If the payment fails, the interest charge will stand and accrue until payment is made. The “direct debit will collect” message is merely to show that HMRC’s system is aware that there is a scheduled payment in process and is nothing to worry about.
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