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PAYE penalties as a result of Natwest meltdown? Contact the bank for compensation says HMRC 27 June 2012

Social media has been buzzing with stories of house transactions falling through, employers not able to pay staff and families not being able to buy food as a result of an IT glitch at the bank. In one case an unnamed man was forced to spend a weekend in prison because he could not get money to pay his bail.

Baker Tilly says employers may not be able to compete for sympathy with such stories but those whose 22 May PAYE and NICs were late, despite sending instructions to their bank in good time for payment to be made on 21 May, will have through no fault of their own achieved their first default in tax year 2012-13.

Payroll professionals have been sharing their experiences on LinkedIn here

An HMRC spokesman told Payroll World: “We are sympathetic to any customer experiencing genuine difficulties in not being able to pay their tax bill, but for customers affected by the specific NatWest/Royal Bank of Scotland Group issue they need, in the first instance, to seek compensation/help from the bank.”

On its own, a single default is not a problem, says Baker Tilly. HRMC recognises that mistakes and delays do happen and it allows one late payment per tax year before penalties begin to arise.

The problem is that May 22 was only the second payment due in the current tax year so that there are another ten to make, all of which need to be on time if penalties are to be avoided.

Special treatment

Liberal Democrat Lord Oakeshott has been scathing of the bank’s handling of the failure.

“There’s no need for Stephen Hester to waste time worrying about his bonus this year. RBS has failed the nation and must be broken up now, with the casino sold off or shut down and the basic bank focusing on the job we paid it £45bn to perform properly,” he said.

Lesley Fidler, a director at Baker Tilly said one client was told by its bank that payments due to leave its account on 20 and 21 May will not be credited to the recipients’ accounts until 25 and 26 May respectively. Its 41 suspended payments included four payrolls’ PAYE which were in good time for the 22 May deadline.

“Consequently, it is already on the brink of a penalty or penalties,” she said. “The next mistake means that a charge based on the employer’s annual payroll cost will be triggered. But the source of the second, triggering, error will not be the current delays and so the employer will have no recourse to the bank for recompense. Nevertheless, it has lost its one opportunity to make a penalty-free mistake.”

Fidler points out that foot and mouth disease resulted in special tax payment terms.

“Surely a banking problem of this magnitude deserves a response from HMRC to set employers’ minds at rest,” she said.

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