HMRC real-time PAYE penalties

Tax Comments Off on HMRC real-time PAYE penalties

It is important to understand the new, complex RTI penalty regime.

Penalties for late real-time PAYE submissions will not be charged until April 2014 – but errors will now be penalised from next April 2013.

No penalties will be imposed for late filing of returns for 2012/13 or 2013/14 under RTI.

The current penalty system will continue to operate at the year end, with penalties charged if the information is not up-to-date by 19 May.  There will be no penalties if in-year full payment submissions (FPSs) are submitted late.

For 2012/13, HMRC will not charge penalties for inaccuracies identified on in-year FPSs – but penalties may be charged after the end of the tax year, based on the final FPS for the year.

There will be no automated late payment penalties until April 2014, but HMRC will use the real-time system to collect late payments.

Real-time information will see PAYE reported on or before the date payment is made, while changes will be reported as and when they occur, rather than at the end of the financial year.

The system will require income tax deductions and national insurance contributions to be reported “on or before” the pay day.

Under RTI there may well then be more errors reported in-year than HMRC are used to seeing.  It will be easy to make timing errors, which would be corrected before the year-end, until employers get used to the new system.

It in harsh that in the first full year of RTI, penalties for errors won’t (as in the pilot), only apply to errors on the final full payment submissions for the year.  This would have given employers a chance to get to grips with RTI before the penalties started to bite.  HMRC have still not provided a satisfactory clear reasoning to justify starting in-year penalties from day one.

If you would like any more information please do not hesitate to call.

John Elliott

Tax Partner