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RTI penalties

RTI penalties

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My software provider (Moneysoft) have told me on the phone that they will be very surprised if come next April everyone is not fully clued up about the rule that an RTI Report must be made on or before the date every employee is paid - and that automatic penalties will ensue.

This matter has not been taxing my brain much hitherto as we have been 'playing our way in' with no penalties this Tax Year. Google searches on "RTI Penalties" do not flag this up as a big problem, but here is what I predict;

HMRC says it will save penalties up for three months then send them out in batches. So about July 2014 a big headline will appear in the Daily Mail along the lines that thousands of small employers have been hit by massive fines.

Let's say that an employer pays on a Wednesday and the accountant does his batch processing on a Friday. After 3 months that is 13 late submissions - a fine of £1300?

Or even, the accountant knows he has to do RTI every day (what a chore that is going to be!) but the teachers go on strike and he has to stay at home. One missed filing, £100 fine, unhappy client, relationship destroyed? - this scenario has already been visited in previous threads on AccountingWeb

You can say I am being alarmist, but can anyone really comfort me? The new regime is so harsh and unforgiving (but, according to my friend at Moneysoft, so obvious) that my scenario seems accurate.

Has anyone who consults with HMRC on behalf of the profession argued for a 7 day filing window?

Replies (35)

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By mumpin
26th Nov 2013 10:12

Concession - how will HMRC know...

I do a pub which pays workers in cash at the end of their shift.

There is supposed to be a 7 day reporting concession in such instances.

I'm presently getting electronic RTI late filing notices for the pub payroll. I'm interested to see how HMRC will know which paye schemes are entitled to the concession. Otherwise the penalty sytem won't work.

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Replying to SteLacca:
Euan's picture
By Euan MacLennan
26th Nov 2013 10:48

There is a concession

mumpin wrote:

I do a pub which pays workers in cash at the end of their shift.

There is supposed to be a 7 day reporting concession in such instances.

I'm presently getting electronic RTI late filing notices for the pub payroll. I'm interested to see how HMRC will know which paye schemes are entitled to the concession. Otherwise the penalty sytem won't work.

You could:

"appeal" against the late filing notices saying that you are operating under the concession (third one on the published list) and would they mind amending their records accordingly, ordate the payroll on the day you run it within 7 days of the actual date of payment and file the RTI report on the same day.

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Euan's picture
By Euan MacLennan
26th Nov 2013 10:31

The logic of RTI "on or before date of payment" is impeccable

It is based on the premise that an employer will not know how much to pay until he has run the payroll and calculated the PAYE.  As soon as he has run the payroll, he can file the RTI report with a couple of mouse clicks and send the net pay details to the employer for payment to the employees.  The RTI requirement of "on or before" will always be satisfied.

I don't understand your scenario "Let's say that an employer pays on a Wednesday and the accountant does his batch processing on a Friday."  Is that batch RTI processing?  Why wouldn't the accountant file the FPS when he has run the payroll on (say) the Monday?

A couple of potential problems can be avoided:

Weekly paid employees.  Some accountants may like to have 52 payroll fees in a year, rather than 12 monthly fees, but it is doing the client no favour.  There has been a concession during 2013/14 that where staff are actually paid weekly (an estimated advance), but the payroll is processed only monthly, they may continue to do so.  That "relaxation" will cease next April (and does not in any event apply to cases where a payroll is actually run weekly).  We have had a year to persuade these clients to switch to a monthly payroll, perhaps by offering the employees a (say) 3 month loan to switch from weekly to monthly payment.  If the client will not change, the payroll will have to be run weekly and he will have to pay for it.Incorrectly dated payrolls.  RTI has flushed out cases where the payroll has always been dated incorrectly on the final day's work which is being paid, rather than on the date of payment to the employees.  To correct this historic error, it may require a tax pay period to be skipped - for example, only 51 weeks in the tax year.  However, do it in 2013/14 and it will not be a problem next year when the penalties start.

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By Marion Hayes
26th Nov 2013 11:25

Physical problem

Small employer which uses irregular employees after school or weekends when busy.

Number of hours not known until end of shift - payment at that point.

None earn enough to report except for the one full time employee who is paid weekly - but again on the number of hours which is unknown until the end of the last day of the week.

If school children not paid at end of shift won't come back again, and all are over 16 so must be included in report.

Whilst I could file every time a payment is made, as Euan says I have to run payroll each time just in case, but I don't think I am able to file that often within the regulations.

Or am I being obtuse here?

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Euan's picture
By Euan MacLennan
26th Nov 2013 11:44

You have 7 days

... after the actual payment to run a payroll and file the FPS.  Presumably, the weekly-paid employee earns enough to have PAYE deductions, so a weekly payroll will have to be run in order to calculate his net pay - say on Monday, if the last day of the week is Saturday, dated Monday, so the RTI report can be filed on Monday and he can be paid on any day from Monday onwards for the previous week.  If he is paid some sort of estimated amount on the Saturday night, the employer will have to change his practice which has never been an acceptable method of operating PAYE.

When running the payroll on the Monday, you can mop up the payments to the school children since the previous Monday.

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By Marion Hayes
26th Nov 2013 12:05

@Euan

Didn't know about the 7 days.

They ring me Friday afternoon, I run payroll and they pay. As hours vary they need to know net. As long as I can include the mop up with that I am fine then

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Replying to Patricia McCartney:
David Ross
By davidross
26th Nov 2013 14:01

7 days

Marion Hayes wrote:

Didn't know about the 7 days.

They ring me Friday afternoon, I run payroll and they pay. As hours vary they need to know net. As long as I can include the mop up with that I am fine then

 

7 days would be just what I think would be reasonable, but people above are saying this only applies in restricted circumstances.

I am happy to see that Moneysoft allows RTI Returns to be made in advance. Where employees are paid a flat rate this means I could file in advance where going on holiday - so thanks to posters in this thread for your help on this.

 

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By Marion Hayes
26th Nov 2013 12:06

p.s.

meant to say thanks too

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By neiltonks
26th Nov 2013 13:48

Payment at end of shift

What not a lot of people know (mainly because HMRC haven't publicised it yet) is that the RTI FPS file for 2014/15 contains an indicator called "Late PAYE reporting reason". This is to be used to indicate when a payment is made late and its use should prevent automatic penalties being applied.

Various 'reasons' are supported, one of which is "Impractical to report work done on the day". This is to be used for the people paid at the end of the shift and is the mechanism by which HMRC will be able to identify these cases.

How the setting of this flag will be handled in payroll software products will, of course, vary from supplier to supplier.

Setting this flag isn't a universal get-out for the 'on or before' rule, as you might still get queries from HMRC when it's used, but it should at least provide a mechanism to avoid having to continually appeal against computer-generated penalty notices.

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By davegibson00
26th Nov 2013 14:08

What about the clients

Who give us the payroll information, then on production of the payslips tell you all the other stuff they have forgotten.

Their problem I assume?

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By Hyprosteps
29th Nov 2013 14:57

What about small companies?

We are a small company and I am the only person who does the payroll. When I go on holiday, I pay a week in advance and sort the difference out the following week. No problem so far. When I returned from a recent holiday, a worker who was off sick when I left (3 days, no SSP form yet), came in the following week. I had worked out what he should be paid in that instance. However, as I didn't know for sure if he would be in or submit an SSP form, I couldn't process any hours/SSP. I had to rollback his record and reprocess so PAYE/NIC was correct and submit an FPS amendment. Again, no problem (I think) as it was only 7 days. If I had been away for 2 weeks would we be fined? If so, does that mean that I can never again take a 2 week holiday? Has HMRC made any allowances for this sort of scenario?

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Replying to scalloway:
Euan's picture
By Euan MacLennan
02nd Dec 2013 16:53

Why don't you make some changes?

Hyprosteps wrote:

If I had been away for 2 weeks would we be fined? If so, does that mean that I can never again take a 2 week holiday? Has HMRC made any allowances for this sort of scenario?

Why do you expect HMRC to make all the allowances?  Why don't you do something yourself?  Two suggestions:

switch your workers from weekly to monthly pay, so that you don't have to meet a deadline every week.  You could even take a 3 week holiday provided it was mid-month.train up a colleague to process the payroll in your absence or outsource your payroll to a bureau or your accountant

[EDIT] corrected to "weekly to monthly" in 1. above

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Replying to scalloway:
By Red Leader
29th Nov 2013 17:11

@Euan

Your logic is faultless except for employers who pay a net amount, leaving the accountant to work out the gross and PAYE/NI.

I don't like these payrolls but it's not uncommon.

EDIT: actually, on reflection it doesn't make any difference. Ignore me.

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By Hyprosteps
02nd Dec 2013 16:41

Making changes

While your suggestions are OK in themselves, in the world of small businesses they aren't necessarily practical.

1. I presume this is a typo and you mean from weekly to monthly

Why should my workers have to change the period they receive their wages and manage their personal finances? (and a 3 week holiday is only a dream for a small business)

2. Yes, I could. For 1 occassion every other year (maybe), train up my other member of staff (and fix the mistakes when I get back) or add to our expenses and pay a bureau or our accountant for a 1 off service, if they were willing/able to do it on such an infrequent basis.

Surely HMRC should have built in an allowance for all small businesses to cover rare occurrences, to be applied against each individual small employer. (e.g. 1 per year per employer, where company has less than 20 employees).

 

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Stepurhan
By stepurhan
02nd Dec 2013 16:55

Waiting for wages?

What happens to your weekly paid staff now in your absence? Do they just wait for their wages or do you calculate in advance and arrange for payment in your absence? Any reason you couldn't file an RTI report at the same time as doing that?

Unless you really have employees that are happy not to be paid while you are away, in which case no problem. No payments = no obligation to report under RTI.

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Euan's picture
By Euan MacLennan
02nd Dec 2013 17:12

Oops!

Yes - sorry - I did indeed mean "weekly to monthly" and have edited my post above.

HMRC has built in just such an allowance as you want.  Read the guidance and note the sentence "However, no penalty will apply for the first month in each tax year that returns are filed late."

But I wouldn't rely on it as a matter of routine, just in case you have an unforeseen problem and need to use the concession for that, which is why I said that you should consider changing your routine.  Incidentally, I was not suggesting that you outsource the payroll for just one pay period, which would be completely impracticable - I was suggesting that you consider outsourcing the payroll completely.

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RLI
By lionofludesch
02nd Dec 2013 17:18

Nonsense

I don't really understand the undue haste for this information.  If I was HMRC, I'd rather have accurate information on what WAS paid a few days after the event than what MIGHT be paid in a few days time.  Having said that, I'd be comfortable with "not having a crystal ball" being held to be a reasonable excuse.  Personally, I think the "on or before" rule will eventually be dropped as it's clearly nonsense and just not necessary

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Replying to SteLacca:
Stepurhan
By stepurhan
02nd Dec 2013 17:30

Accurate pay

lionofludesch wrote:
If I was HMRC, I'd rather have accurate information on what WAS paid a few days after the event than what MIGHT be paid in a few days time. 
Surely you actually calculate what is due to employees before you actually pay them. Unless you are just guessing what to pay employees, then you have the information to make an RTI report before you make the payment. Regardless of whether HMRC are using the information as they should be, what is the problem with transmitting this information you already have?
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Replying to DJKL:
By gerrysims
02nd Dec 2013 18:32

not always

stepurhan wrote:

lionofludesch wrote:
If I was HMRC, I'd rather have accurate information on what WAS paid a few days after the event than what MIGHT be paid in a few days time. 
Surely you actually calculate what is due to employees before you actually pay them. Unless you are just guessing what to pay employees, then you have the information to make an RTI report before you make the payment. Regardless of whether HMRC are using the information as they should be, what is the problem with transmitting this information you already have?

It's not unknown for a client to send in their payments information then when you send back payslips they call you with something they've forgotten. Their problem you may say but why impose this ludicrous burden when we all know the information will never be used in real time.

So much for sweeping away red tape,

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Replying to DJKL:
RLI
By lionofludesch
03rd Dec 2013 09:05

On or before

stepurhan wrote:

lionofludesch wrote:
If I was HMRC, I'd rather have accurate information on what WAS paid a few days after the event than what MIGHT be paid in a few days time. 
Surely you actually calculate what is due to employees before you actually pay them. Unless you are just guessing what to pay employees, then you have the information to make an RTI report before you make the payment. Regardless of whether HMRC are using the information as they should be, what is the problem with transmitting this information you already have?

Here's a scenario .......  Small businessman is out on a business trip on payday so he submits his RTI on Thursday night.  On Friday morning, an employee doesn't turn up for work, so he doesn't get paid.  It turns out he's taken another job so he never gets that Friday pay.  Sure - you can submit a whole year's RTI at the start if you want but (a) how useful is that to anyone ? and (b) the earlier you submit it, the more likely there are to be errors in it.  We can't all just allocate our Fridays to sending RTI in, you know.
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By taxhound
02nd Dec 2013 17:21

ridiculous

I think the on or before requirement is so ridiculous.  If we can file the payroll for the previous month on or before the 19th of the following month, as with CIS, then at least it gives us all time to sort out everyone's nonsense each month.

We all know HMRC are not using the data on a live basis and the chance of that happening any time soon are pretty much zero.  Yes, I know it is all related to the new benefits system but talk about a burden to small employers!

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Stepurhan
By stepurhan
02nd Dec 2013 23:53

Opportunity to train

Nothing focuses a client's mind like "you will pay penalties if you don't deal with this now". Perhaps this is the opportunity to train clients to deal with things properly in the first place. Even if you bill them extra, no-one has ever really loved re-calculating a payroll because the client "forgot" something.

Incidentally, I don't think RTI penalties should be imposed before HMRC sort out their own systems. There are enough threads on here about chasing for incorrect amounts to show that their systems aren't fit for purpose as they stand. I just don't think clients failing to fulfill the responsibilities they've always had, but up to now have avoided, is a good excuse for stopping penalties.

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Stepurhan
By stepurhan
03rd Dec 2013 09:36

Very specific scenario

Employee of small business who only works Fridays (or he would still be due payment for the rest of the week) and no payment by BACS. Possible but rare I would have thought. If someone else is making the payments on the Friday, as they must be if the employer is away that day, there must be someone they trust to do that. Can that person not also be trusted to handle the RTI submission? Does the business shut down entirely if the employer is away for more than a week? (no-one to process payroll at all)

There is the provision for making corrections under RTI, so I don't even see this as being a problem. The comment about submitting a year's RTI is somewhat facetious. No-one is suggesting that, they are just saying that it should be perfectly possible to submit in advance.

I agree that HMRC should be as subject to penalty for error as taxpayers are though.

 

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Replying to Linda Skilbeck:
RLI
By lionofludesch
03rd Dec 2013 09:45

Reading too much into it

stepurhan wrote:

Employee of small business who only works Fridays (or he would still be due payment for the rest of the week) and no payment by BACS. Possible but rare I would have thought.

<sigh>He didn't get paid because he wasn't there to be paid, not because he only worked Fridays.  It was just a hypothetical example.  Anyway, the fact is, that I've already had two scenarios where the pay has had to be altered due to absenteeism late in the week.   Perhaps you don't deal with payroll much ?  And believe it or not, lots of small employers still pay wages in cash.
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Replying to Lone_Wolf:
Euan's picture
By Euan MacLennan
03rd Dec 2013 10:51

Not reading enough into it

lionofludesch wrote:

stepurhan wrote:

Employee of small business who only works Fridays (or he would still be due payment for the rest of the week) and no payment by BACS. Possible but rare I would have thought.

<sigh>He didn't get paid because he wasn't there to be paid, not because he only worked Fridays.  It was just a hypothetical example.  Anyway, the fact is, that I've already had two scenarios where the pay has had to be altered due to absenteeism late in the week.   Perhaps you don't deal with payroll much ?  And believe it or not, lots of small employers still pay wages in cash.

I have no idea how many payrolls Stepurhan deals with, but I deal with 90 of them and I agree completely with him.  RTI does not affect the operation of PAYE, but by imposing a weekly or monthly reporting structure, it highlights the incorrect operation of PAYE and is therefore an opportunity to train clients out of bad habits.  Judging by this thread and others, a lot of employers and their accountants are very reluctant to mend their past ways in order to operate PAYE correctly and seem to expect HMRC to bend over backwards to accommodate their exotic variations on a theme.  HMRC will allow one late RTI filing a year without penalty and the RTI system has error correction built in by submitting subsequent FPSs with corrected YTD figures.  HMRC have done all that can reasonably be expected.  It is up to employers and their accountants to make arrangements to fix whatever other problems they may have in operating PAYE or complying with the RTI requirements.

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RLI
By lionofludesch
03rd Dec 2013 10:58

Penalties

Fair comment.  Yet I still think it's about generating revenue by penalties.

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Stepurhan
By stepurhan
03rd Dec 2013 11:31

Too much and too little

I read that the employee not being paid at all meant that he only worked on Friday. If not, then he would still be due payment for the rest of the week's work. I admit that would still require recalculation but, as noted, RTI has correction built in. I also grant that an employer on a current week basis may have to do adjustments for late absence, which is out of their control. Again, RTI allows for correction, so no reason to not submit the report showing the expected payments on time.

I take your point about paying cash. Most employers I have dealt with in recent years pay by some form of direct credit. It is therefore rare in my recent personal experience, but I appreciate that is not the same as it being rare across the whole country.

I'd still like to know how this employer, hypothetical or otherwise, gets payroll dealt with in their absence. There must be some backup plan in place if they know they are going to be away for a whole week other than employees simply not being paid.

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RLI
By lionofludesch
03rd Dec 2013 11:41

Easy

He submits early - thereby increasing the risk of submitting inaccurate information. Maybe that'll lead to the employee being overpaid or underpaid benefits - but that's not the employer's concern or problem.

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Stepurhan
By stepurhan
03rd Dec 2013 12:06

Inaccurate employee payments too

Subject to the method of payment, an employer that prepares the payroll in advance rather than having any backup for absences risks employees being overpaid too. At least RTI errors can be corrected but getting money back from a departed employee may not be so simple. This is why having some sort of backup in place is advisable, though granted that is not always easy for the smaller business.

As you say, overpaid or underpaid benefits are not the employer's concern or problem directly. I can't see how submitting by the 19th of the next month is better for that though. Does that not mean that benefits are calculated on out-of-date information? If an employee leaves on 6 December and that isn't reported until 19 January, that is a big gap in the record. Even for monthly payroll, that is almost three weeks additional delay compared to reporting on payment. Even an overestimate of pay for a single period is more accurate than nothing.

This is on the basis that RTI information does end up getting used for its intended purpose, of course. Even I am not convinced that is the case at present.

 

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RLI
By lionofludesch
03rd Dec 2013 12:58

Six Weeks ?

I agree with you.  I said after, not six weeks after.

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Stepurhan
By stepurhan
03rd Dec 2013 13:02

Different poster

Checking back through the thread, I see it was taxhound that suggested that, not you. Apologies for the confusion.

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Replying to DJKL:
RLI
By lionofludesch
03rd Dec 2013 13:41

No problem

stepurhan wrote:

Checking back through the thread, I see it was taxhound that suggested that, not you. Apologies for the confusion.

No problem. 
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By cfield
03rd Dec 2013 16:14

Standing orders

I have one client who pays an employee a flat £800 per month by standing order. I just work out the gross, check the software agrees net pay of £800 and submit the FPS.

Trouble is we never know for sure when the standing order will go through, so date of payment is a bit of a guessing game. We could easily be 1-2 days out.

Fingers crossed - HMRC will never come round on a compliance visit and check the dates against the bank statements, but if they did, would it qualify for their 7 days grace?

Very easy to forget RTI for just one employee too. It could easily miss the end of the month.

Clients sometimes forget about the risk you're taking on when they moan about extra fees for RTI. If a £100 penalty for a late submission lands on their doorstep, who's going to pay it, the client or the accountant?

By way of example, one of my clients (3 owner directors) put their wives on the payroll for work they've been doing. As they're not directors we had to come off the annual RTI scheme as there would be NI if they were paid annually. I charged them the princely sum of £12.50 per head per month. One of them moaned like mad. Even threatened to find a new accountant if he could find one who would do it for free. And they've just made over a million pounds profit too!

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By Hyprosteps
04th Dec 2013 12:03

Making changes

stepurhan - I process wages in advance by taking a best guess at the hours they will work, based on the previous 6-8 weeks (we are a small company and only have 9 weekly paid employees). I make any adjustments to the next payroll I run. All payments are arranged and RTI filings are made before I leave.

Euan MacLennan - I assumed you meant outsource on a permanent basis, but that will cost far more than it's worth to us. Thank you for the link, I have copied the information to my ever growing list of RTI things to remember and thank you for being as informative as ever.

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