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HMRC delays introduction of RTI penalties for small employers

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HMRC has announced that it will exempt small employers with fewer than 50 staff from being issued with automated PAYE real-time information (RTI) late filing penalties until March 2015. Those who employ 50 or more people will face penalties from 6 October 2014. The department will send electronic messages to all employers shortly to let them know when the penalties will apply to them, based on the number of employees shown in the department’s records.

Ruth Owen, HMRC director general for personal tax, said RTI was ‘working well’, with the department’s figures showing that over 95% of PAYE schemes making payments to individuals were successfully reporting in real time, and 70% said that it was 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,’ Owen said. ‘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.’

The CIOT welcomed the announcement as a positive step in helping small business transition into the new PAYE reporting method, but said that ‘wrinkles remain’ in the overall system.

Colin Ben-Nathan, chairman of the institute’s employment taxes sub-committee, warned 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.

‘Additionally, we consider that HMRC needs to do more to make speedier use of the RTI data it is receiving to improve the accuracy of PAYE deductions for employees and pensioners,’ Ben-Nathan added.

HMRC stated that employers who believe they have a reasonable excuse for sending a return late will be able to appeal using HMRC’s new online appeals process for automated penalties. This should speed up the appeal process for businesses and HMRC, the department said.

HMRC also said that it is to examine other ways to encourage employers to comply with the rules, in addition to financial penalties, in the run up to March 2015.

Issue: 1230
Categories: News , Employment taxes