Electronic Payment

18.14 Surcharge period

The surcharge period starts at the point in the deduction year when you first default. It does not end until there has been a complete tax year with no defaults.

So if you have made a late payment, it could take you as long as 23 months to be completely clear of a surcharge.

For example, if you default in May 2007 (deduction year 2007-08), you must not default again in the rest of 2007-08 and make sure you do not default at all in deduction year 2008-09.

Payments that are not made electronically, but which clear by 19th of the month, will not count towards the surcharge, even though you have not paid electronically when you should have done.

The surcharge is calculated on the amounts shown on your Return, we will tell you how much your surcharge is when we have finished all our checks.

Each default is counted within each surcharge period. The first two defaults in a surcharge period are charged at 0%. If you default again, we will charge you at increasing percentage rates. These are:

 

Default number
(within the surcharge period)

Percentage
%

1

0

2

0

3

0.17

4

0.17

5

0.17

6

0.33

7

0.33

8

0.33

9

0.58

10

0.58

11

0.58

12 or more defaults

0.83

Surcharge example one

A large employer defaults four times in 2004-05, five times in 2005-06, once in year 2006-07, four times in year 2007-08, has no defaults in 2008-09 and three defaults in 2009-10.

Surcharge would be calculated as follows:

 

Tax Year

Total Default count value (at tax year end)

Surcharge percentage
(at tax year end)


Surcharge value based on a form P35 net figure of £120K
(£10K per month)

Surcharge value based on a form P35 net figure of £600K
(£50K per month)

Surcharge value based on a P35 net figure of £12M
(£1M per month)

2004/05

4

0.34
(0 + 0 + 0.17 + 0.17)

£408

£2,040

£40,800

2005/06

9

1.74
(0.17 + 0.33 + 0.33 + 0.33 + 0.58)

£2,088

£10,440

£208,800

2006/07

10

0.58

£696

£3,480

£69,600

2007/08

14

3.07
(0.58 + 0.83 + 0.83 + 0.83)

£3,684

£18,420

£368,400

2008/09

0

No surcharge and surcharge period ends as no defaults in the tax year

£0

£0

£0

2009/10

3

0.17
(0 + 0+ 0.17)

£204

£1,020

£20,400

Surcharge example two

An employer incurs no defaults at all in 2004-05. In 2005-06 the employer fails to make a payment by the due date on three occasions and receives three defaults. In addition, the employer pays CIS deductions late twice that year and receives a further two defaults. In 2006-07 the employer again pays its CIS deductions late twice and receives a further two defaults.

Surcharge would be calculated as follows:

 
Tax Year

Default count (at tax year end)

Surcharge percentage
(at tax year end) %

Surcharge

2004/05

0

0

0

2005/06

5 CIS defaults and
3 defaults each on PAYE, NIC and Student Loan (SL) duties

CIS % used = 0.51
(0 + 0 + 0.17 + 0.17 + 0.17)
PAYE / NIC / Student Loan % used = 0.17 (0 + 0 + 0.17)

CIS surcharge is £255. This is based on 0.51% of the 2005/2006 CIS annual charge of £50,000. The PAYE / NIC / SL surcharge is £935
This is based on 0.17% of the combined 2005-06 annual charge of £550,000
So total 2005-06 surcharge is £1,190 (255 + 935)

2006/07

7 CIS defaults and no defaults for PAYE, NIC and SL duties.

CIS % used = 0.66 (0.33 + 0.33).
No surcharge charged on PAYE, NIC and SL duties. The surcharge period ends in respect of these duties as no default of these duties occurred in the tax year

CIS only surcharge, which is £330. This is based on 0.66% of the 2006-07 CIS annual charge of £50,000