From 6 October HMRC will begin issuing automated PAYE real-time transaction (RTI) penalties to companies sending late RTI reports.
The PAYE RTI represents a fundamental reform of Pay As You Earn, which required all UK employers to notify HMRC of their liability to PAYE. It is hoped that the new automated system will be easier for employers, as well as helping reduce the amount of reports issued late. The overhaul represents the largest change to the PAYE system since its introduction in 1944, and is part of the Government’s commitment to the introduction of Universal Credit made in October 2013.
HMRC declares the report to be late if it is paid on or before the date the employee is paid. Currently, there is no penalty fee for the first late RTI report after 5 October, but subsequent offences will result in a fine, the amount of which correlates to the number of employees on the employer’s payroll. There is a minimum fine of £100 and a maximum of £400. If the fine remains outstanding after three months, a further penalty equal to 5% of the PAYE/CIS tax and NI will be charged. RTI penalties will be posted to employers after the end of each quarter.
Those believing penalties to be incorrectly issued can appeal through HMRC’s website, but must do so immediately or else risk the HMRC earmarking some of their next PAYE payment to cover the fine.
However, not all companies will be immediately affected, with HMRC announcing plans to introduce the system in stages. Initially, it was announced that the rule wouldn’t apply to employers with fewer than nine staff on their payroll until 5 April 2015. However, HMRC recently revised this exemption to small employers with fewer than 50 employees, which will end in March 2015.
Ruth Owen, HMRC Director General for Personal Tax, said: “We know from our experience of rolling out 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.”