Employers can now set up a Direct Debit (DD) Mandate to pay PAYE/NIC to HMRC automatically. This can be set up from a Business Tax Account or via Employers PAYE Service. The DD must be set up by the business bank account signatory that has authority to set up Direct Debits for the business.
There are several advantages to setting up this variable direct debit to pay PAYE/NIC:
- The amount collected through will be the figure declared on the Real Time Information (RTI) submission(s), less any overpayments allocated to off-set against that amount.
- The direct debit can never be more than the declared figure on the RTI return, and it can’t exceed £20 million.
- The employer will be informed three days in advance that the payment will be taken.
- The funds will be taken from the employer’s bank account on 23rd of the month or the next banking day after that date.
- There will be no additional interest charges for paying by direct debit provided it is honoured.
- The employer doesn’t have to remember to make the PAYE payment or worry about what reference to include with the bank transfer of the amount due.
What do I need to do?
- Use the link below to sign in to your Business Tax Account via HMRC online services
This link can also be found at the bottom of your P32 letter
- Once signed in – select “Set up a Direct Debit” option
- You will need to register your email address and will have 15 minutes to verify the address once HMRC send you the verification email. Click on the link in the email from HMRC once received.
- Click “Continue” once your email has been verified
- Set up the Direct Debit using your business bank account details [Account Name/Sort Code/Account Number] then confirm you are the authorised account holder/bank signatory
- Once you are happy that your details are correct, click “Confirm and set up Direct Debit”
- You will then see a DD Instruction confirmation with a reference number and you have an option to print or save this as a PDF.
Please let us know once you have set up your DD and the month it is starting. The start date will be set to 23rd of the month and remember that payments are collected in arrears e.g. November’s P32 would be collected on 23rd December and so on.
The launch of the new variable payment plan will result in a new “Set up a direct debit” link being introduced to the business tax account and the employers’ liabilities and payments screens on the employers’ PAYE service.
Users will then have to set up a direct debit instruction, which will authorise HMRC to collect directly from their bank account based on their return submissions. Once this has been authorised, the link will switch to “Manage your direct debit”. Employers will also be able to use this option to change or cancel the direct debit.
HMRC has confirmed that the direct debit will never be more than the number declared on the Real Time Information (RTI) returns and can never be more than £20m. The money will be taken out on the 23rd of each month or the next working day – and there will be no additional charge for the employer to use the payment plan.
This functionality, though, will still be restricted to employers only. HMRC said that there is no “scope for agents to do it”. As instructed by the banking rules, agents will still not be able to set up the direct debits on behalf of their clients.
While the direct debit payment plan solves many issues, and responds to customer feedback, there will be charges collected on Full Payment Submission (FPS), Employer Payment Summary (EPS), Construction Industry Scheme, Apprenticeship Levy, Class 1A National Insurance and the Earlier Year Update.
We recommend that employers monitor the new service carefully and check notifications. Industry bodies have mostly welcomed the move.
A spokesperson from the Chartered Institute of Payroll Professionals (CIPP) said: “This is a great step forward, and shows how HMRC is trying to be as flexible as possible to support employers, and to keep up with technological advancements. It will be interesting to see, in the coming months, how many employers make use of this functionality, and we hope HMRC will provide figures in this area.”