HMRC to phase in penalties for late real-time PAYE returns

Businesses with less than 50 employees will experience automated penalties for late real-time PAYE returns from 6th March 2015.
 
However, those who employ 50 or more people will face in-year penalties from 6th October 2014 with HM Revenue and Customs (HMRC) set to distribute electronic messages to all employers soon to let them know when the penalties will apply specifically to them.
 
In the event an employer believes they have a reasonable excuse for sending a real-time PAYE return late, they will be given powers to appeal using HMRC’s new online appeals process for automated penalties.
 
Ruth Owen, director-general for personal tax, HMRC, believes a phased approach is the best way for business owners to get accustomed to in-year penalties.
 
"Real Time Information is working well. Our most recent figures show that over 95 per cent of PAYE schemes making payments to individuals are successfully reporting in real time, and 70 per cent say that it is easy to do.
 
"We know from our experience of rolling out of RTI that to ensure a smooth transition for our customers it’s best to introduce changes in stages.

"This will allow us to update our systems and enhance our guidance and customer support as needed. We know that those who have had most difficulty adjusting to real-time reporting have been small businesses, so this staged approach means they have a little more time to comply with the new arrangements before facing a penalty.
 
"We believe this is the best approach for HMRC and our customers, as we all get used to the new in-year penalties."
 
The Chartered Institute of Taxation (CIOT) has hailed the announcement to exempt SMEs with less than 50 staff of real-time PAYE late filing penalties until March 2015.
 
The CIOT feels it is best to give smaller firms the opportunity to adjust to administrative changes longer given their comparatively smaller resources.
 
Colin Ben-Nathan, chairman, CIOT Employment Taxes sub-committee, said: "The Institute welcomes this delay until March 2015 as regards the issuing of automated PAYE RTI late filing penalties for small employers.
 
"Smaller employers, in particular, need a longer period of time to adjust to PAYE and other administrative changes because they have very limited resources which are primarily geared to servicing their clients and customers. So it is encouraging to see that the Government have recognised this point in the present circumstances.
 
"However, we think that HMRC still has work to do in ensuring the accuracy of automated generic notification messages to employers. An improvement in the accuracy of the late filing, non-filing and late payment messages would not only reduce the volume of penalties issued in error by HMRC, but would also reduce the number of appeals that inevitably result from this."

Last updated: 10th September 2014