HMRC has said that it will delay the introduction of penalties for late "real time" payroll returns by up to one year in response to complaints from accountants and businesses and after errors and technical glitches in the new system.
It had planed to start fining employers for late filing and payment of employees' tax and national insurance contributions from 6 April.
Under the new timetable for penalties, if employers file RTI late up to October they'll only be charged interest.
After October, if employers file and pay RTI late they'll only be charged a penalty for filing late.
From April 2015, they'll be an automatic penalty for late payment of payroll tax and contributions.
HMRC’s director general for personal tax, Ruth Owen, said: “The introduction of RTI is going extremely well for the majority of employers but there are still some who need a bit of time to adapt fully to the changes. This additional time will give us the opportunity to ensure that improvements to our internal systems are working, to learn from them and to provide better customer support to employers who need more time to adapt.”
The news will be a relief to accountants who have received a rash of incorrect PAYE “no-filing” notices and follows a call from the ICAEW and other professional bodies and software developers for a delay to the imposition of automatic penalties under the real time information (RTI) regime.
On Friday morning (7 February), AccountingWEB member 0098087 reported getting a load of RTI non-filing notices for the period ending 5 Feburary, even though their payment run was on the 7th and their RTI returns on the same day.
The issues wtih RTI are not limited to the generic notification service (GNS) messages that went out last week, but the deluge - which could have run into hundreds of thousands of messages - certainly helped bring the underlying threat of automatic penalties into relief. In its announcement of the new penalty timetable, HMRC also said it would suspend GNS alerts for late payment and non filing until April 2014.
Colin Ben-Nathan, chairman of the Chartered Institute of Taxation sub-committee for employment taxes, welcomed the penalty delays as a "constructive move" on HMRC's part that will give both employers and HMRC time to bed down what is a fundamental change to the PAYE system. "It will also help to reassure employers that HMRC does not establish deadlines in an arbitrary manner but is responsive to the concerns and realities of those on the ground," he said.
“There are also still some problems with RTI itself which need to be addressed by HMRC. And so we think it is absolutely right that the imposition of automatic penalties should be delayed until these problems are fully investigated and resolved.”
Peter Bickley, technical manager at the Institute of Chartered Accountants in England and Wales, said the delay was "very good" news but said there is still plenty of room for improvement in the new payroll system. He said HMRC needs to make its RTI software easier to use for employers entering payroll information and to reduce discrepancies in information.
"When employers enter joining and leaving dates for employees instead of putting the correct dates they have to put dates in to suit HMRC. For example, if an employee joins a company in March 2013 the employer may have to enter 6 April 2013 as the joining date into HMRC's RTI system so it's the correct tax year for HMRC's IT system."
Payroll software suppliers such as Hampshire-based Moneysoft that have been busy handling customer questions about problems with sending RTI information will also welcome the delay to penalties. Further improvements to HMRC's IT would also help.
Moneysoft managing director George McHamish said HMRC could save everyone a lot of hassle by giving more information in its late-filing notices for RTI -- for example stating which week's payroll return was late.
For further reactions, see the comments below, and also visit the Editor's blog, RTI penalties: A drama or a crisis?