Under RTI, information about tax and other deductions under the Pay-As-You-Earn (PAYE) system is required to be transmitted immediately to HMRC by the employer every time an employee is paid – even if this is daily or in irregular amounts.
HMRC began phased introduction of RTI in April this year, with a group of around 300 employers who have volunteered to take part in an initial pilot. All employers will be required to submit information using RTI from October 2013.
The Chartered Institute of Taxation (CIOT) want the Government to defer any penalty regime for the new system, so this would mean no late filing penalties levied on employers for in-year submissions during the first full 12 months of RTI’s operation.
Colin Ben-Nathan, chair of the CIOT’s Employment Taxes committee, said: “This is a new responsibility and burden being placed on employers. The penalty regime must be proportionate and give time for employers to get used to the new and sometimes onerous obligations RTI imposes on them. For this reason, we recommend that no late filing penalties are charged for the first full year of RTI reporting (that is, October 2013 to October 2014).”
The CIOT is recommending that the penalty model acknowledges an employer’s compliance history with a proposal that the first default attracts no penalty, a second default results in an automatic suspended penalty and only a third (and subsequent) default within a specified ‘default period’ results in actual penalties. The Group beleives that this would encourage compliance and minimise the effort for HMRC in chasing small penalty amounts.
It said that penalties should be based upon the number of employers for whom information is filed late – it should not be based on the total employee pool, which would unfairly penalise large employers where the vast majority of information is filed on time.
On or before
Colin Ben-Nathan said: “One of the biggest issues for employers is the requirement to send information to HMRC ‘on or before’ payment is made to the employee - potentially meaning more frequent running of the payroll and more reporting for some employers when, in the past, they have been able to comply with their obligations by doing a monthly payroll.
“‘On or before’ reporting will be extremely difficult for employers who pay employees at the end of a shift based on the hours just worked or amount produced. Employers with expatriate employees and share schemes will probably find the requirements impossible to meet consistently.
“Unless this is resolved, penalties and non-compliance may become a way of life for some employers. RTI should not create a situation where there are frequent and widespread defaults attributable to the design of the regime rather than to any particular bad practice by employers.
The CIOT is calling for the Government to consider changing its Universal Credit plans in order to allow monthly reporting of payments under RTI, rather than the current proposal to require businesses to send information to HMRC ‘on or before’ payment is made to the employee, each time a payment is made. The CIOT believes this will pose a considerable hurdle to full compliance for many employers (especially small businesses and in certain business sectors).
HMRC responded: "HMRC welcomes comments on our proposals for how late filing and late payment penalties will apply best to RTI.
"Our use of penalties has never been about raising revenue. They are designed to encourage compliance, and to reassure the majority who do file and pay on time that HMRC takes non-compliance seriously.
"We understand the concerns that some employers have raised about reporting payroll information “on or before” the time of payment. We are working with employers and other representatives, including our Customer User Group, to find the best way to address these issues."
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Susie Hughes © Shout99 2012