HM Revenue and Customs (HMRC) has published guidance on penalties for late and inaccurate returns submitted in real time (RTI).
The guidance sets out that for employers operating PAYE in real time:
There will be no penalties if in-year Full Payment Submissions (FPS) are sent in late, until April 2014. The current penalty process will continue to apply at the year end, with a penalty being charged if the relevant information is not up to date by 19 May. From October 2013, HMRC will send letters so that employers understand that they would have been liable to a penalty
There will be no automated late payment penalties until April 2014. The current processes will remain until then. HMRC will use real time information to collect late payments
For the tax year 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
For the tax year 2013-14, if we discover inaccuracies on FPSs, in-year penalties may apply. HMRC will use the same considerations as now to identify employers for compliance visits. If HMRC discovers inaccuracies as a result of a review, it will use the same criteria as now to decide whether a penalty applies and if so, how much it should be.
The full guidance is published here
Information on real time information and late payment has also been published as a What’s New item.
Suzanne Newton, Programme Director for Real Time Information, said:
After stakeholder consultation, we have published our guidance on late and inaccurate returns sent in real time. This will give most employers a year to get used to reporting in real time before implementing the new penalties.
The delivery of PAYE real time reporting is on track. HMRC has been piloting RTI since April 2012 and it is going really well.
After our most recent pilot expansion, we now have PAYE information for over 2.1 million individual records successfully reported in real time from more than 15,000 PAYE schemes.
Feedback from pilot employers is that reporting in real time is straightforward for the vast majority of them.
Notes for editors
Employers are required to begin to report in real time in April 2013. Employers with 5,000 or more employees need to agree a start date with HMRC so that they are routinely reporting in real time by October 2013.
The RTI pilot was launched in April 2012 with just 10 employers. Since then, the pilot has expanded three times. By March 2013, HMRC expects PAYE records for around 6 million individuals to be reported in real time.
Employers and pension providers must submit a Full Payment Submission (FPS) each time they pay an employee or pensioner. If they still have information to send after 5 April, they can send this on an FPS until 19 April. After that they should use an Earlier Year Update. To avoid a late filing penalty, they must report the final payment made to an employee or pensioner by 19 May following the end of the relevant tax year.
- When considering a penalty for an incorrect return under Schedule 24, Finance Act 2007, HMRC will continue to use the same considerations as now, that is:
- HMRC will continue to use a risk-based approach to identify employers who it thinks may be submitting incorrect returns
- Where HMRC does a review of a PAYE scheme and discover that the employer has submitted an incorrect return, HMRC will continue to apply penalties according to the behaviours that led to the errors, the amount of potential lost revenue and the timing and extent of any disclosure to HMRC.
Errors that arise despite reasonable care having been taken attract no penalty at all and penalties for errors due to failure to take reasonable care can be reduced to zero with full and unprompted disclosure. The overall amount of error penalties assessed in-year, for any tax year, should be no more than an error penalty applied to an Employer Annual Return that contained the same errors under traditional PAYE – assuming the behaviour that led to the error was similar.
Details on what happens if you don’t report payroll information on time here
A webinar called “Get ready to operate PAYE in real time” is available to view here
- Two further educational products are available:
- RTI will support the operation of Universal Credit – the Government’s flagship welfare programme – which brings together means-tested in and out-of-work benefits, Tax Credits and support for housing, and will improve work incentives and make work pay.
Published: 29 November 2012
From: HM Revenue & Customs