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HMRC internal manual

Compliance Handbook

Penalties for Failure to File on Time: Types of penalties for failure to file on time: PAYE Real Time Information returns: 3 month extended failure penalty

An employer may be liable to a further penalty if the failure to make a PAYE Real Time Information return on or before the filing date continues beyond the period of 3 months beginning with the day after the filing date. This is known as an extended failure.

The penalty is discretionary and will only be charged in the most serious cases or where there has been persistent failures to file RTI returns.

Extended failure penalties can be charged for each extended failure in a tax year. The law allows HMRC to charge a separate penalty for each extended failure in a tax year or a single penalty for all of the extended failures in a tax year to date.

The penalty is 5% of the liability to make payments (total PAYE, Class 1 NIC and SL deductions) which should have been shown on the missing return or returns. There are no deductions for the type or quality of disclosure.

Under RTI employers report year to date pay and tax information. If they fail to make a return the law (regulation 67EA of the PAYE regulations and 21EA of Schedule 4 of the NIC regulations) says the employer must provide the information on their next return. So where a return has not been made but the employer has provided all the outstanding payments on a later return (FPS or EYU), HMRC no longer need the earlier return and will not charge an extended failure penalty for the missing return.

If the employer has only reported some of the payments on a later FPS/EYU we may still charge an extended failure penalty for the missing return. However any payments that have been reported on a later FPS/EYU should be omitted from the penalty calculation.

If we decide an extended failure penalty is appropriate we must give notice to the employer specifying the date from which the penalty or penalties are payable. The date specified in the notice may be earlier than the date that the notice is given, but must not be earlier than 3 months from the original filing date.

You should follow the operational guidance, which will be published shortly, in CH401260 which explains the circumstances when an extended penalty may be appropriate and the process for authorising and raising the manual penalty.

Note: there are no 6 or 12 month further penalties for PAYE Real Time Information returns.