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A significant part of HMRC’s penalty regime for the real-time information (RTI) system for PAYE is a letdown and needs to be rethought, according to the Chartered Institute of Taxation (CIOT).
The Revenue’s newly published guidance shows there will be no fines for inaccuracies identified on in-year full payment submissions (FPSs) for 2012/13, but sanctions may be incurred after the end of the tax year – and in-year penalties may raised as the result of inaccuracies on FPSs in 2013/14, the first 12 months of obligatory RTI for most employers.
The CIOT’s technical director, Tina Riches, said the professional body was “disappointed that the government remains determined to levy in-year penalties for errors in submissions” from the outset of the new PAYE reporting set-up.
She added, “At the moment, if there are errors in-year that are corrected by the year-end – as often happens when an agent or adviser reviews the payroll - there are no penalties. Under RTI, it will often be the client doing the regular submissions, so there may be more mistakes in-year than HMRC are used to seeing.”
Timing slip-ups will be common among employers until they get used to the new system, insisted Riches. “Penalties should apply only to the final FPSs for the year. This would give employers a fighting chance of getting to grips with RTI before fines start to bite.”
She welcomed the news that HMRC will not levy penalties on late in-year FPSs until April 2014.
The current penalty process will continue to apply at the year-end, with fines charged if the relevant information is not up to date by 19 May. The taxman will issue letters employers from October 2013 to explain that they would have been liable to a sanction.
There will also be no automated late-payment penalties until April 2014, until which time the present system will remain in place.
“The package of penalties does make one wonder if employers will be tempted to delay submissions until they have been properly checked, so as to minimise the risk of fines,” said Riches.
