HMRC has confirmed a relaxation of its approach to PAYE late filing penalties. Instead of issuing penalties automatically when a deadline is missed, HMRC has said they will take ‘a more proportionate approach and concentrate on the more serious defaults on a risk-assessed basis.’ This is in accordance with HMRC’s recent policy outlined in the HMRC penalties: a discussion document which was published earlier this year and follows HMRC's recent announcement in February that they will not be penalising minor delays of up to three days.
Late reporting penalties already apply to employers with 50 or more employees, so this ‘risk-based’ approach will apply to submissions that were late from 6 March 2015 for employers with fewer than 50 employees, and 6 January 2015 for employers with 50 or more employees. HMRC will continue to issue risk-based penalties for the tax year 2015/16 tax year.
This change in approach reflects representations made by CIOT in its response to a consultation on HMRC penalties in May. CIOT stressed HMRC should ‘be prepared to accept that the default position should be that an error is innocent unless there is evidence to the contrary’.
HMRC also said it wants to focus on educating employers about their filing obligations – news which was welcomed by Colin Ben-Nathan, CIOT’s Employment Taxes Sub-Committee chair. ‘Tax advisers are keen to work with HMRC to educate business about good practice and support them in improving their systems and complying,’ he said.
Anthony Thomas, chairman of CIOT’s Low Incomes Tax Reform Group, said: ‘By not probing each and every reasonable excuse claim, HMRC are treating taxpayers as honest. This is what HMRC’s Charter says they should do.’
ATT president, Natalie Miller, said: ‘This is the second very positive step resulting from HMRC’s penalties review, following the news that those who send their self-assessment returns in late will not be questioned if they have claimed they have a reasonable excuse. Clearly HMRC’s approach is driven in part at least by pragmatism. They are finding it difficult to cope with a system that issues hundreds of thousands of fixed penalties, in particular where taxpayers don’t pay them and therefore resources have to be put into chasing very small amounts, or when they appeal them citing “reasonable excuse” and HMRC have to then follow this up, again using valuable resources in doing so. With increasing digitisation HMRC’s systems should find it easier to identify the “serial late filer” and “serial appealer” so that this more pragmatic approach is not open to abuse.’
She warns, however, that: ‘If HMRC does not explain its approach then there is the concern that some of these employers may end up becoming ‘serial late filers’ because they will see the penalty system as an “empty threat”. The system has to retain its ability to influence behaviour and so the employers who won’t be receiving their penalties due to this new approach need to be made aware of the reason why.’
HMRC will review this new approach by April 2016. See www.bit.ly/1LgUM9h.
HMRC has confirmed a relaxation of its approach to PAYE late filing penalties. Instead of issuing penalties automatically when a deadline is missed, HMRC has said they will take ‘a more proportionate approach and concentrate on the more serious defaults on a risk-assessed basis.’ This is in accordance with HMRC’s recent policy outlined in the HMRC penalties: a discussion document which was published earlier this year and follows HMRC's recent announcement in February that they will not be penalising minor delays of up to three days.
Late reporting penalties already apply to employers with 50 or more employees, so this ‘risk-based’ approach will apply to submissions that were late from 6 March 2015 for employers with fewer than 50 employees, and 6 January 2015 for employers with 50 or more employees. HMRC will continue to issue risk-based penalties for the tax year 2015/16 tax year.
This change in approach reflects representations made by CIOT in its response to a consultation on HMRC penalties in May. CIOT stressed HMRC should ‘be prepared to accept that the default position should be that an error is innocent unless there is evidence to the contrary’.
HMRC also said it wants to focus on educating employers about their filing obligations – news which was welcomed by Colin Ben-Nathan, CIOT’s Employment Taxes Sub-Committee chair. ‘Tax advisers are keen to work with HMRC to educate business about good practice and support them in improving their systems and complying,’ he said.
Anthony Thomas, chairman of CIOT’s Low Incomes Tax Reform Group, said: ‘By not probing each and every reasonable excuse claim, HMRC are treating taxpayers as honest. This is what HMRC’s Charter says they should do.’
ATT president, Natalie Miller, said: ‘This is the second very positive step resulting from HMRC’s penalties review, following the news that those who send their self-assessment returns in late will not be questioned if they have claimed they have a reasonable excuse. Clearly HMRC’s approach is driven in part at least by pragmatism. They are finding it difficult to cope with a system that issues hundreds of thousands of fixed penalties, in particular where taxpayers don’t pay them and therefore resources have to be put into chasing very small amounts, or when they appeal them citing “reasonable excuse” and HMRC have to then follow this up, again using valuable resources in doing so. With increasing digitisation HMRC’s systems should find it easier to identify the “serial late filer” and “serial appealer” so that this more pragmatic approach is not open to abuse.’
She warns, however, that: ‘If HMRC does not explain its approach then there is the concern that some of these employers may end up becoming ‘serial late filers’ because they will see the penalty system as an “empty threat”. The system has to retain its ability to influence behaviour and so the employers who won’t be receiving their penalties due to this new approach need to be made aware of the reason why.’
HMRC will review this new approach by April 2016. See www.bit.ly/1LgUM9h.
