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Mandatory Electronic Payment For the tax years 2004-05 onwards the Mandatory Electronic Payment (MEP) legislation in Income Tax (Employments) (Amendment) Regulations 2003 (S.I. 2003/2682), later amended by »Ê¹ÚÌåÓýapp Income Tax (Pay As You Earn) (Amendment) Regulations 2010, requires large employers to pay their monthly PAYE/ NIC deductions in full and on time by an approved electronic method. »Ê¹ÚÌåÓýapp purpose of the legislation is to encourage compliance from the largest employers.

By PAYE/ NIC deductions we mean PAYE / NIC due from employees plus subcontractor and student loan deductions, less tax credits, less any payments of SSP/SMP/SAP and SPP, less any CIS25 credits.

For a further explanation of what may be due from an employer see also DMBM520935.

Surcharge: applicable to tax years 2004-05 to 2009-10 only

Legislation covering surcharge

For PAYE

• Regulation 203 Income Tax (Pay As You Earn) Regulations 2003

For subcontractors deductions

• Regulation 52 Income Tax (Sub-contractors in the Construction Industry) (Amendment) Regulations 2004

For NIC

• Regulation 90K Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 and

For Student Loan Deductions

• Regulation 52B Education (Student Loans) (Repayment) (Amendment) Regulations 2004.

»Ê¹ÚÌåÓýapp regulations aim to encourage compliance by ensuring prompt payment from the largest employers.

A challenge to the regulations in 2005 revealed there is no over-arching legislation that brings the separate regulations detailed above together. As a result the surcharge is made up from separate surcharges charged under each of the four regulations.

Note: Assurances have been given to various representative bodies that underpayments for previous years identified in the course of employer compliance reviews will not be treated as defaults. »Ê¹ÚÌåÓýapp employer should not be penalised twice for the same offence i.e. default and a penalty on the back of the employer compliance recovery.

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Changes to e-payment legislation from 6 April 2010

»Ê¹ÚÌåÓýapp late payment penalty regime introduced by Schedule 56 Finance Act 2009 applies from 6 April 2010 and to tax years 2010-11 onwards. It replaced the surcharge element of MEP legislation so no surcharges will be raised on late payments for any tax year after 2009-10. It also removed the requirement to issue segmentation notices notifying an employer of their segmentation type. »Ê¹ÚÌåÓýapp changes can be found in DMBM523500.

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»Ê¹ÚÌåÓýapp Income Tax (Pay As You Earn) (Amendment) Regulations 2010

All employers who have 250 or more employees on 31st October are classed as ‘large employersâ€�. »Ê¹ÚÌåÓýappy are required to pay their monthly PAYE/ NIC deductions in full and on time by an approved electronic method for the following tax year, even though they are no longer issued with a notice declaring them to be a large employer. »Ê¹ÚÌåÓýapprefore the onus is on them to recognise they are a large employer and that they are required to pay electronically.