Another RTI penalty quashed

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Kate Upcraft reports on the second published case concerning RTI late filing penalties, which has found the penalties were invalid and has news of the demise of the EYU.

Judge Thomas rules

All RTI penalties are supposed to be risk-assessed by an HMRC officer, rather than issued by computer as an automatic process, so it is surprising that the case of Vasco Properties Ltd v HMRC [2018] UKFTT 653 got as far as the tribunal.

The tribunal team at HMRC must have known their chances of winning were slim, especially when they realised that Judge Thomas was presiding over the case. Judge Thomas ruled in the first published case on RTI late filing penalties (J & L Benson Building Services Ltd TC06546), which was lost by HMRC due to poor and inappropriate documentation.

A particular source of embarrassment in this latest case was that the RTI returns in question had been submitted by the employer using the HMRC’s own PAYE filing software Basic PAYE Tools (BPT).


The employer contended that they had submitted figures during 2017/18 and had done exactly the same in 2016/17 using BPT with no queries whatsoever from HMRC. The Judge surmised that the 2017/18 upgrade to the BPT may have been the root cause.

The first penalty was generated for the first quarter of 2017/18, but this was cancelled by HMRC and an ‘educational letter’ was sent to the employer. Three returns for the months to 5 November 2017, December 2017 and January 2018 were deemed late, but the first late one for the year is not penalised.

In lodging their appeal, the employer attached significant evidence to show that submissions had been made and received by HMRC. Also, the employer’s accountant had tried several times to contact the HMRC employer helpline about the matter but had given up because the waiting times were too long.

Tribunal view

In his case report Judge Thomas makes mention of 82 documents, the majority of which appear to have been submitted by the employer to HMRC to contest the penalty. Despite this, the late filing penalties totalling £200 were upheld on review.

Judge Thomas cancelled the penalties on the basis of the evidence from the employer provided by Basic PAYE Tools. He did accept HMRC’s contention that no reasonable excuse had been put forward, but simply dismissed that by saying that the employer was not required to put forward a reasonable excuse because they had done nothing that needed excusing!

HMRC, said Judge Thomas, needed to stop issuing stock letters about returns not received and start investigating whether there were IT issues at play. This advice could be applied to a lot of compliance activity around RTI, as HMRC continue to focus on outcomes rather than root causes.

Goodbye EYU

In December 2014, HMRC promised it would review the design of the Earlier Year Update (EYU) used by employers to correct a prior year’s PAYE figures after 19 April, which is the deadline for making corrections using the Full Payment Submission (FPS).

The EYU is also requested extensively by HMRC staff when they are trying to correct the figures that have been corrupted by their systems on receipt from the employer, back to the original submission made by the employer.

The problem with the EYU is that it was an afterthought when RTI was being designed, so they simply reincarnated internal HMRC functionality that had existed prior to RTI for correcting P14s. In those pre-digital days, employers submitted a new paper P14 indicating plus/minus values to correct the previously submitted figures. Carrying forward the use of so-called ‘delta values’ into the digital world was problematic.

Payroll software is designed simply to provide new figures that overwrite previous figures, not to provide adjustments. For this reason, some payroll software providers chose not to offer the EYU within their products, insisting that if clients wanted to amend figures that this should be done via the BPT.


Roll on four years to November 2018, HMRC announced that from April 2019 it would introduce a new option of providing a year to date full payment submission (YTD FPS) after 19 April 2019. This will be able to simply overwrite the year-end figures for an employee (or employees) with the corrected values.

The new YTD FPS will run in parallel with the EYU for the 2019/20 tax year so that either mechanism can be used to amend 2018/19. This parallel running is cautionary in case payroll software providers can’t introduce the YTD FPS by the start of the new tax year.

Basic PAYE Tools will only offer the EYU for 2019/20, but from 2020/21 the EYU will be formally abolished for correcting 2019/20 and beyond. The EYU will still be in use for correcting 2018/19 and prior years.

About Kate Upcraft

Kate is a technical writer, editor and lecturer on all aspects of employing people - primarily payroll and HR matters.


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11th Dec 2018 11:43

Woohoo. No more EYU nonsense.

Now, we just need HMRC systems to stop corrupting the data in the first place. That will remove the need for a huge number of adjustment post Y/E.

Thanks (5)
12th Dec 2018 09:38

So we have gone back to the "once a year" scenario making RTI pointless. No doubt a similar scenario will happen to MTD.
Let's talk about something really interesting. I spy with my little eye something beginning with B.

Thanks (4)
to johnjenkins
12th Dec 2018 22:57

This is about correction. There is no return to once a year submission. However, it gives potentially the ability to replace values over those applied by HMRC which are not visible easily to the employer.

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to psimonparsons
13th Dec 2018 08:35

It doesn't matter if it is correction or submission we are back to what it was. Admittedly you still have to submit monthly but wasn't the purpose of RTI, MTD et al to eliminate errors?

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12th Dec 2018 10:52


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to memyself-eye
12th Dec 2018 11:18

Very warm.

Thanks (0)
By trecar
12th Dec 2018 11:33

Is it me or are we being inundated with acronyms? HR, HMRC, BPT, RTI, EYU, FPS, YTD and lastly but not least PAYE. I know that it is more efficient in fast communication, but what happens when two or more of them clash? As an example FSB could mean the Financial Stability Board, Federation of Small Businesses or the Russian Secret Service. I see a new smart phone app coming along

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12th Dec 2018 14:31

I find much of the RTI and MTD stuff almost incredible. We in Ireland are moving to our version of RTI from the beginning of our tax year (1st January 2019) and I am confident that it will work well, because all of the other Revenue advances have been introduced in consultation with taxpayers and their representative bodies.

I am certain that our Revenue would never attempt (or get away with) the egregious behaviour by HMRC that I have read about on this site.

Here's hoping I don't have to come back here in a few months' time to eat humble pie!

Thanks (1)
to Brend201
12th Dec 2018 14:46

Have you got a back stop?

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to johnjenkins
13th Dec 2018 15:44

Well, we and our 26 new bessie mates think we have. And the UK, still our friend, was described today as having invoked the backstab mechanism.

Thinking of you in these difficult times. (And I'm not being facetious here.)

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to Brend201
12th Dec 2018 23:00

I think you might be eating humble pie over ROI

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to Brend201
15th Dec 2018 17:39

I have to, from time to time, have to deal with the Irish Revenue Commissioners, and I have to say that the department is streets ahead of HMRC. Knowledgeable front line staff, polite, no hanging around listening to a bloody robot for ages when you phone.

I think HMRC should outsource their whole operation to RoI.

Thanks (1)
12th Dec 2018 16:30

When’s the wake and can I come. Is it cremation or burial?

Next should be the ridiculous EPS

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12th Dec 2018 17:07

I've just got one of these today - HMRC say they have received a Month one FPS for 2017/18, which includes a specific employee with no reference number. Then a leaver status, and 2 FPS's for the same employee with a reference number in month 2. Result, a thirteenth payment for this employee. A letter to the employee asking for tax and a letter to the employer asking for PAYE underpaid.

They have now added 'disputed charge' to the file and I have to wait for someone to phone me back.

My Moneysoft program shows just 12 FPS submissions. However, I bet you they will ask me to submit an EYU to correct their error, when there isn't anything wrong at my end!

In the meantime, I have to spend time, speaking to:

-The agents line for the employee (I am his agent)
-The employers line over the PAYE
-The Employer client over the PAYE letter
-The Employee client over their letter

I do wish we could bill HMRC for the time we have to spend on their errors.

Thanks (3)