Paying employer’s liabilities by direct debit 

In the August 2022 issue of the Employer Bulletin, HMRC announced that a variable Direct Debit option for PAYE and NIC liabilities would be introduced from 19 September 2022 and HMRC launched the functionality in October 2022.

Previously employers could only set up a Direct Debit to collect a single payment, but not a recurring Direct Debit, therefore none of our clients currently pay by Direct Debit. With the new system, employers can take advantage of a new variable Direct Debit payment plan, you can set it up once and then pay your PAYE and NIC liabilities every month automatically. 

The business tax account and the employers’ liabilities and payments screens on the employers’ PAYE service have changed. A new link ‘Set up a Direct Debit’ has been introduced and this allows employers to set up a Direct Debit instruction, authorising HMRC to collect direct from their bank account based on their return submissions.

After the Direct Debit is set up, the link will change to ‘Manage your Direct Debit’ and an employer will be able to view, change or cancel the Direct Debit online.

HMRC has confirmed that the amount collected by Direct Debit will be the number declared on returns submitted by employers or their payroll agents, or a lower amount if any overpayments have been allocated to reduce the original declaration. The direct debit will not be greater than the amount declared on the return. It will also not be more than £20m, in accordance with Direct Debit BACS rules – although you would have to have a significant workforce for the liabilities to be over this amount.

HMRC will take the money due 4 days after the due date, or the next bank working day. Employers will receive an advance notice three days in advance of every collection date, notifying them of the amount being collected. There will be no additional interest charged to employers who choose to pay by variable Direct Debit payment plan, provided that their Direct Debit payment does not dishonour for whatever reason, (ie, insufficient funds, bank account closed, etc.).

The payments will show on your bank statement as ‘HMRC SDDS’.

You cannot pay any interest or penalties by Direct Debit so if you are in this situation you’ll need to pay another way.

The facility to create, view, amend and cancel a Direct Debit is restricted to employers only, there is no scope for agents to do this.

You can find out more on the gov.uk site