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HMRC internal manual

Compliance Operational Guidance

From
HM Revenue & Customs
Updated
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Supporting Guidance: employer compliance: guidance by subject: Real Time Information (RTI): charging interest for RTI inaccuracies

You must charge interest on duties that should have been included on a

  • Full Payment Submission (FPS) or
  • Earlier Year Update (EYU)

which you are recovering by Class 6 settlement or formal determination.

Current year inaccuracies

Current year only inaccuracies should not be included in a contract settlement.

Where the employer reports the correct year to date information on an additional FPS or the next ‘regular’ FPS (see COG904240), HMRC calculate how much the employer is due to pay and requests payments. If payment of the additional tax and NIC is made by the due date, no interest will be charged.

However, where you are also recovering additional duties for

  • closed years or
  • expenses and benefits or
  • other liabilities

and the employer insists that current year liabilities are included in the contract settlement, then you can do so.

But, you must advise the employer that it is more beneficial to correct the current year inaccuracy by submitting the correct year to date figures on

  • an additional FPS or
  • the next ‘regular’ FPS and

make payment by the due date to avoid interest being charged.

You should not ordinarily include current year liabilities in a contract settlement.

Example

During a compliance check in August 2014, you discover that BIG Ltd paid untaxed overtime payments in April, May and June 2014. You also discover inaccuracies for earlier years which will be recovered by Class 6 settlement. The employer asks that the tax and NIC for the current year is included in the contract settlement.

If the employer reports the correct information on the next FPS and makes payment of the liabilities by the due date, no interest will be charged.

If the current year liabilities are included in the contract settlement, interest will be charged from the date the original payment was due until the expected date of settlement, as follows:

  • overtime received April 2014 - interest charged from 19 May 2014
  • overtime received May 2014 - interest charged from 19 June 2014
  • overtime received June 2014 - interest charged from 19 July 2014.

The interest should be included in the contract settlement.

Note: It is always more beneficial to the employer to correct any current year inaccuracies on an FPS.

Closed year inaccuracies

Closed year inaccuracies should be corrected by

  • submitting an Earlier Year Update (EYU) for years where RTI has been operated or
  • Class 6 settlement where P35/P14s have been submitted.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Where an EYU is submitted, interest will be charged from 19 or 22 April following the end of the tax year to the date of settlement.

Where the employer asks that the additional duties for closed year inaccuracies are included in a contract settlement, interest will be charged from 19 or 22 April following the end of the tax year to the expected date of settlement.

Example

During a compliance check in October 2014, you discover that BIG Ltd paid untaxed overtime payments in July, August and September 2013.

As the inaccuracy relates to a ‘closed RTI year’ you should instruct the employer to submit an EYU. On receipt of the correct information, HMRC calculate how much the employer is due to pay and request payment by 19 December 2014. ETMP will automatically calculate the interest to be charged from 19 or 22 April 2014 (after the end of the tax year) until the payment date of 19 December 2014.

However, where you are also recovering additional duties for pre-RTI years and the employer requests that the additional tax and NIC for the ‘closed RTI year’ is included in a Class 6 settlement, under collection and management you can include all the additional liabilities for all years, in a contract settlement. Interest will be charged from 19 April following the end of the tax year to the expected date of settlement, as follows:

  • overtime received July 2013 - interest charged from 19 April 2014
  • overtime received August 2013 - interest charged from 19 April 2014
  • overtime received September 2013 - interest charged from 19 April 2014.

The interest should be included in the contract settlement.

Regulation 80 determinations and Section 8 notices

Where the employer does not correct inaccuracies on an FPS or EYU as instructed, and you are unable to settle by contract settlement, you must follow current settlement procedures and seek to recover additional liabilities by Regulation 80 determinations and Section 8 notices, see COG907210.

Interest will be charged from the date the original payment was due until the expected date of settlement, as follows:

  • overtime received July 2014 - interest charged from 19 August 2014
  • overtime received August 2014 - interest charged from 19 September 2014
  • overtime received September 2014 - interest charged from 19 October 2014.

Note: It is always more beneficial to the employer to correct inaccuracies on an FPS or EYU.