PAYE/NI bills to be payable via recurring DD

Paying PAYE/NI by DD

To pay a VAT bill, businesses can set up a variable direct debit (DD) which takes the VAT automatically on the due date. However, this option hasn’t previously been available to pay the monthly/quarterly PAYE/NI bill. At present, employers can only set up a DD to collect a single PAYE/NI payment. This means that there is a greater risk of missing a payment and incurring late payment interest and penalties. The good news is that HMRC has finally listened to employers and added this variable DD payment plan functionality so that you can now pay your PAYE/NI bill by DD.

How to access the service

There will be changes to the business tax account and the employers’ liabilities and payments screens on the employers’ PAYE service. A new link “Set up a Direct Debit” will be introduced and this will authorise HMRC to collect the PAYE/NI directly from your organisation’s bank account based on its monthly FPS and EPS submissions. Once you’ve set up the DD, the link will change to “Manage your Direct Debit” and you will be able to view, change or cancel the DD online.

Note. The facility to create, view, amend and cancel a DD is restricted to employers only; there’s no scope for agents to set up DDs on behalf of their clients.

How long does it take to pay by DD?

You’ll need to allow five working days for HMRC to process a DD for the first time. So, it’s likely you’ll need to pay the PAYE/NI due on 22 September 2022 by another method and then the first PAYE/NI payment taken by recurring DD will be the one due on 22 October 2022. The payments will show on your bank statement as “HMRC NDDS”.

What about Class 1A NI?

Class 1A NI usually has to be paid separately on 22 July. But if you sign up to a variable payment plan, then it will be taken automatically through the DD on receipt of the P11D(b) . The following charges will also be collected on receipt of the returns to HMRC:

• full payment submission (FPS)
• employer payment summary (EPS)
• construction industry scheme (CIS)
• apprenticeship levy
• earlier year update (EYU).

Are there any disadvantages?

When everything goes smoothly and the HMRC application of data matches the FPS/EPS submissions from the employer, then great, the facility should work well. However, for some employers the RTI update process can be a problem with not all data updates applied by HMRC being correct. For example, inadvertent duplication of FPS records by HMRC occurs frequently. This could result in you paying a higher DD amount than you expect.

Pro advice. You can get around this problem by checking your employer account online to ensure that the PAYE/NI due agrees to your payroll software. If it doesn’t, you should contact the employer helpline and cancel the DD until it is sorted out. Just make sure you pay what you believe is due in another way.