RTI penalties extended to small employers but surprise announcement will help soften blow

Penalties now apply to small businesses for late filing of PAYE submissions under the new Real Time Information (RTI) system.1 However the Revenue has confirmed that there will be a three-day grace period (for all employers) before the penalties are imposed.2 The Chartered Institute of Taxation (CIOT) and the Low Incomes Tax Reform Group (LITRG) have welcomed this relaxation mitigating a burden which would have been felt particularly keenly by many of the smallest employers.
Since October 2014, employers with 50 or more employees have been subject to late filing penalties if they send PAYE information to HMRC late. Although HMRC initially intended employers with fewer than 50 employees also to be subject to penalties from this date, an extension to March 6th 2015 was given to smaller employers who needed more time to adapt to the new system.

CIOT Tax Policy Director, Patrick Stevens, said:

“Although there is no change to the actual filing deadline, which for the vast majority of employers still means a Full Payment Submission (FPS) should be filed on or before each time they pay their staff, this three day grace period is certainly a helpful concession.

“This comes in addition to the rules which stipulate that brand new employers can send their first submission within 30 days of first paying an employee without incurring any penalties3. In all cases, the first late submission of the year is ignored. It is also the case that micro employers (those with up to nine employees) who commenced payrolls before 6 April 2014, are essentially allowed to file monthly anyway until April 2016.

“Further relaxations recently announced include HMRC continuing to review late payment penalties manually, instead of imposing them automatically (as intended from 6 April 2015) and employers no longer needing to complete a set of year-end questions on the final FPS of the year, which in an effort to simplify the process, are disbanded from 6 March 2015.”4

LITRG Technical Director, Robin Williamson, added:

“All of these easements are to be welcomed. However, for many of the smallest employers, particularly ‘accidental employers’ – those who have taken on a personal assistant to help them with care or social needs – operating a payroll so that they can pay their employee and complying with all their other employer obligations can mean that there is still an awful lot to worry about. Therefore we would urge HMRC to reassure those smallest businesses where the penalties burden will be more keenly felt by keeping these helpful concessions coming.”

Notes for editors

1.       From 6th March 2015. Further information on RTI penalties can be found, here.

2.       To take advantage of the three day grace period employers must use the late reporting code E on their returns.

3.       With the exception of employees with fewer than 50 employees where the rule is not applied for the period from 6/3/15 to 5/4/15 only. 

4.       On the assumption that the software in question will allow you to do so; not all software will have been updated to the requisite level.

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.

6.       The Low Incomes Tax Reform Group (LITRG)

LITRG is an initiative of the Chartered Institute of Taxation to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.