Professional tax bodies called on the government to hold back from charging employers penalties under the new real time information (RTI) system for PAYE reporting.
In their responses to HMRC’s latest consultation on RTI the ICAEW Tax Faculty and the Chartered Institute of Taxation (CIOT) both urged the tax department to delay levying penalties on employers for in-year submissions during the first full 12 months of RTI’s operation.
With enhanced penalties for late submissions and careless/negligent errors on self assessment returns causing trouble, tax advisers are increasingly concerned that HMRC is using its penalty powers as a way to generate extra revenue. HMRC should not charge penalties for late payroll returns until the RTI system is working properly, the Tax Faculty argued.
Under the new payroll system employers will send information about tax and national insurance they deduct from employees’ wages to HMRC when they are made - rather than at the end of the tax year in April-May, as happens now.
Real-time PAYE is well into its operational pilot phase, with more than 250,000 schemes expectred to come on board before the regime becomes mandatory in April 2013.
“We would like to see the whole RTI system working properly, at capacity, for a full tax year, before penalties are imposed,” the ICAEW said. “Given resource constraints this is likely to take some time and we therefore recommend that the penalty regime should not start until October 2015,”
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- Other ICAEW concerns
- The view from the CIOT
- HMRC agent account manager comments