Tax advisers disappointed at ending of RTI relaxation for all but smallest employers

Contact: James Knell (jknell@ciot.org.uk) or Matthew Oliver (moliver@ciot.org.uk) on 020 7340 2702 / George Crozier on 020 7340 0569 or 07740 477374 (gcrozier@ciot.org.uk)

The Chartered Institute of Taxation (CIOT) has expressed its disappointment with the Government’s decision to discontinue the relaxation granted for Real Time Information (RTI) reporting of PAYE information for all but the very smallest employers. The CIOT is concerned that the removal of the relaxation for small employers will place additional burdens and costs upon employers.

These worries were prompted by an announcement yesterday from HM Revenue & Customs (HMRC), which has stated that it will roll back the existing temporary relaxation for RTI reporting and replace it with another, modified, temporary relaxation that only applies to existing businesses with one to nine employers.1

Colin Ben-Nathan, Chairman of the CIOT’s Employment Taxes Sub-Committee, commented:

“The burden of ’on or before’ reporting has been a significant concern for many employers. In the summer we welcomed the Government’s decision to extend the relaxation of RTI reporting for small employers until April next year as we felt that it would assist in reducing the resulting costs imposed upon smaller employers. This autumn the CIOT and the Association of Taxation Technicians surveyed our members who frequently help small businesses with Pay As You Earn (PAYE), RTI and related matters. Their clear view was that the current relaxation of real time reporting of PAYE information for small employers is key in enabling them to operate RTI and that it should be made permanent.2

“HMRC announced yesterday that from 6 April 2014 there will be a new temporary relaxation for businesses but only for those with fewer than ten employees. This means that small businesses with ten or more employees will lose the flexibility the current reporting relaxation affords them. We think this is very disappointing.

“As HMRC’s recent research indicates3, RTI has increased costs and burdens for significant numbers of employers and we consider that the ending of the existing relaxation will only exacerbate this position.  We would therefore urge HMRC to continue to work very closely with the professional bodies and to redouble efforts to do everything possible to minimise the costs of RTI and the associated administrative burdens falling on employers and their agents.

“We also suggest that the Government considers extending the exemption from the RTI late filing penalty for 2013/14 to April 2015 for employers with fewer than 50 employees – this would at least ease the transition for those employers currently making use of the RTI reporting relaxation. In addition, if the existing modifications for RTI reporting on payments to certain casual employees and for payments which vary according to work done on the day (and so cannot practically be calculated in advance), were extended from 7 days to the next time the regular payroll is run (if later), this would also ease the extra burden employer’s will face with the ending of current relaxation.

“Although the new temporary relaxation is far from ideal for small businesses, we understand that HMRC has been under pressure to produce a PAYE reporting system which will comply with the incoming Universal Credit model. However, HMRC’s best practice scenarios published yesterday4 themselves recognize that, in any event, the data reported is only “a snapshot of the payroll information at a point in time”.  This demonstrates that the Universal Credit calculations are intrinsically best estimates in any event, in that for any given period for which corrections need subsequently to be made (e.g. because of sickness or overtime) the Universal Credit payment for that period will not in fact be a reflection of the total payments made to the employee for that period.“

Notes for editors

1.       Background to this announcement

Under RTI employers are required to report details of payments made to employees to HMRC on or before the time of the payment. Following constructive dialogue between numerous professional and trade bodies led by the CIOT and Low Incomes Tax Reform Group, and government, a significant relaxation to the RTI PAYE reporting requirements for small employers was announced on 19 March 2013 for a limited period (to 5 October 2013), which was subsequently extended to 5 April 2014.

The change permitted employers with fewer than 50 employees who find it difficult to report every payment to employees at the time of payment, to send information to HMRC on the date of their regular payroll run but no later than the end of the tax month (5th of the next calendar month).

The temporary relaxation for employers with 49 or fewer employees will now end on 5 April 2014 and be replaced by a narrower, time-limited relaxation for micro employers.

HMRC are to implement the time-limited relaxation for micro employers from 6 April 2014. The relaxation will mean that, until April 2016, existing employers with nine or fewer employees may report payments ‘on or before’ the last pay day of the month. The new relaxation will not be available to new employers.


HMRC’s announcement can be accessed here.

2.       CIOT and ATT members’ RTI survey results can be accessed here.

3.       HMRC’s Assessment of impact of ‘on or before’ reporting can be accessed here.

4.       HMRC’s best practice scenarios can be accessed here.

5.       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 17,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

Matthew Oliver
External Relations Officer (Jobshare Monday, Tuesday and Wednesday)

D: +44 (0)20 7340 2702

Chartered Institute of Taxation
Registered charity number 1037771
www.tax.org.uk

The Association of Taxation Technicians
Registered charity number 803480
Registered company number 2418331
VAT Registration Number 497 5390 90
www.att.org.uk

1st Floor, Artillery House, 11-19 Artillery Row, London SW1P 1RT