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Any interest in RTI?

27th May 2014
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Not quite such a foolish question as it might at first appear. HMRC is now calculating daily interest on unpaid or underpaid PAYE in-year. This has applied from the start of the 2014/15 tax year. From the date a payment is due until the date the payment is made in full HMRC will accrue and credit interest charges to employers’ PAYE accounts.  This means that if HMRC think PAYE has been underpaid based on information from FPS and EPS reports, interest will build up regardless of whether the underlying charge is correct.  Although HMRC will not seek payment of interest until the original outstanding amount has been settled and agreed, the sight of interest accruing could alarm employers who think they have filed and paid correctly and on time.

Interest charges will be shown on the Business Tax Dashboard and in letters sent to the employer, allowing employers to keep track of what HMRC is charging them.  However, there is concern among accountants and payroll agents that HMRC’s systems are not adequately keeping track of payments and liabilities, raising the issue of which figures interest is calculated on.  If a payment has been misallocated by HMRC systems, should an employer have to pay interest on the “underpayment” caused by that misallocation?  If a liability is disputed by the employer will HMRC calculate and charge interest on the disputed amount?  Employers cannot appeal against interest charges themselves, only the underlying penalties and charges, so these are important questions.

HMRC does not issue a statement of account showing liabilities and payments for PAYE because of “an increasing number of requests” for them, according to a recent a statement to AccountingWEB on the issue, and it is up to employers to keep accurate records so that they have access to information about what payments have been made.  The problem of monitoring what is owed and what has been paid is exacerbated by the RTI Information Gap – the fact that agents do not have access to the Business Tax Dashboard – which means the employer, their agent and HMRC waste time trying to work out what has happened to the employer’s PAYE account. To add to the confusion, it appears that the Business Tax Dashboard is currently showing interest accruing even where the charge has been cleared by an EPS.  HMRC says that this problem will be corrected shortly and that it will not pursue the charge; employers do not need to contact HMRC about this issue, but this assurance raises perhaps more questions than it answers about the application of interest charges.

It all points to the importance of quickly and efficiently creating an audit trail around RTI and PAYE: using direct BACS to make payments to HMRC of PAYE and NI on behalf of clients - where the money travels directly to HMRC from the client’s own business bank account - but their agent knows how much was paid, to which account and on what date, greatly simplifies matters, just as paying wage and salary payments to employees by CreDec BACS gives you access to the compliance protection of RTI hashes.  How employers choose to pay their employees and HMRC is becoming more central to PAYE in real time.

With moves underway to give HMRC the power to take money directly out of debtors’ bank accounts, being able to evidence your payments as well as your PAYE compliance has never been more important.

RTI BACS hashing provides a complete audit trail for your RTI reporting and payments to employees.  To find out how to access CreDec RTI BACS for your business’ payroll or provide RTI BACS services to your payroll clients, get in touch at www.credec.com/rti-bacs or call us on 0871 350 0490

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