CIOT: Institute seeks further extensions to RTI penalty free period
The Chartered Institute of Taxation (CIOT) is calling on the Government to widen the penalty free period for the new system of ‘Real Time Information’1 (RTI) so that no penalties are levied on employers submitting inaccurate returns until April 2014. Currently it is proposed to levy penalties for incorrect returns from the point that Finance Bill 2013 gains Royal Assent (expected to be July 2013), although penalties for late in-year returns will not be introduced until April 2014.
The CIOT is also calling for the Government to extend the penalty free period for the last tranche of employers to join RTI (such as care and support employers), who will join the system in April 2014, so no penalties are imposed on them until April 2015.
The CIOT makes these calls in its response to the Government’s consultation on Draft Finance Bill 2013 Clauses: Real Time Information (RTI) – Penalties: Late Filing, Late Payment and Errors.
Commenting, Colin Ben-Nathan, chair of the CIOT’s Employment Taxes committee, said:
“This is a substantial new responsibility and burden being placed on employers. The penalty regime must be proportionate and give time for employers to get used to the new and sometimes onerous obligations RTI imposes on them.
“It is welcome that the new late filing and late payment penalties will not be applied until April 2014. However, given this, it seems odd that the penalty for inaccuracies in RTI returns will be in place from summer 2013. Employers may take the view that it is best to delay filing if there is a risk they could be penalised for an inadvertent mistake.
“Additionally, for those employers who will not join RTI until April 2014, such as those employing carers, we would suggest that penalties should not apply until April 2015.”
The CIOT continues to have significant concerns around the need to publicise RTI and about the bureaucratic burden RTI will bring for many smaller employers.2 Colin Ben-Nathan explained:
“We think the Government need to redouble efforts to publicise what employers need to do to fulfil their obligations under RTI. As RTI comes in, employers will frequently come across situations where they are unsure what their obligations are in regard to how and when to report certain payments and what to include on returns. It will be essential for them to be able to obtain assistance from HM Revenue and Customs (HMRC) via a dedicated RTI helpline and for HMRC to ensure that there are sufficient, and well-trained, advisers available to answer questions.”
“The requirement to submit returns ‘on or before’ the time payment is made also represents a huge increase in the burden on many small businesses that currently keep adequate records. It will mean more frequent running of payroll software and more reporting for some employers when, in the past, they have been able to comply with their obligations by doing a monthly payroll. Many small employers will find themselves paying their payroll agents much more than at present.
“Given the additional burdens on employers, we think that HMRC should as a matter of urgency update the main Impact Assessment for RTI, which we do not think properly reflects the significant administrative burdens for employers.”
Notes to editors
1. Under ‘Real Time Information’ (RTI), information about tax and other deductions under the Pay-As-You-Earn (PAYE) system is required to be transmitted immediately to HMRC by the employer every time an employee is paid – even if this is daily or on an irregular basis. HMRC began phased introduction of RTI in April 2012, with a group of around 300 employers who volunteered to take part in an initial pilot. The new system will become compulsory for most employers by April 2013 with a small number remaining exempt until April 2014. The move to RTI is being driven by the introduction of Universal Credit.
2. The current Universal Credit proposals provide individuals with a benefit period based upon the date of their first claim, rather than a calendar or tax month basis. This has triggered the ‘on or before’ requirement for RTI to enable DWP to calculate income during different benefit months for different individuals.
In November HMRC announced that they were willing to relax slightly the ‘on or before’ requirement for some employers. Payments which vary according to the work done on the day, where it is impractical to report on or before will be able to be submitted up to seven days later. This applies, for example, where someone is employed to pick crops in a field and they are paid in cash based on the amount that they have picked, or if a pub calls up an extra member of staff because they are exceptionally busy on a particular night, and pays them by cash or cheque that night.
However, the proposed relaxations are narrowly defined and there is still an expectation that many employers will need to submit payroll information weekly. This means that a small business that makes an identical payment to a member of staff each week will have to outsource its payroll or have a bookkeeper visit weekly to run the payroll software each time, instead of just once a month, with a corresponding increase in cost, typically from about £250pa to around £1,000pa for a small employer.
3. HMRC’s information on the proposals includes:
· A summary at: http://www.hmrc.gov.uk/news/rti-paye-returns.htm.
· New employer FAQs on reporting ‘on or before’ are at: http://www.hmrc.gov.uk/rti/employerfaqs.htm#14
· Details of situations where employers will not have to report PAYE information 'on or before' the time they pay their employee is available at: http://www.hmrc.gov.uk/rti/on-or-before.pdf
4. The Chartered Institute of Taxation
The Chartered Institute of Taxation (CIOT) is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.
The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.
The CIOT’s 16,500 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
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