HMRC softens plans for automatic RTI penalties

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HMRC’s long-running “soft landing” for the RTI regime took another few steps this morning when it announced a number of concessions to reduce the number of late payment and late filing penalties.

Automatic penalties for late PAYE payments were due to start from 6 April, but HMRC said it will now continue to “risk assess” these penalties rather than issuing them automatically.

The department confirmed that automatic penalties for filing RTI submissions late will start from 6 March 2015, but has opened a new three-day concession for those who missed monthly full payment submission (FPS) filings since last October.

FPSs are due by the end of the tax month (6 March), but any employer hit with an in-year late filing penalty between 6 October 2014 and 5 January 2015 where they were less than three days late can appeal online against the penalty by completing the “Other” box and adding “Return filed within 3 days”.

To further reduce the number of unnecessary penalties issued, HMRC will also close around 15,000 PAYE schemes in March that have not made a PAYE report since April 2013 and which appear to have ceased.

“We recognise that RTI is a relatively new highly digital system and that although the majority pay and file on time, some employers are still adapting,” HMRC told AccountingWEB.

“Therefore, for the time being, on late payment penalties, we have decided to continue to review payment defaults and assess risks before issuing penalties. On late filing penalties we have decided to not penalise employers for filing delays of up to three days.”

PAYE late payment and late filing penalties are also being considered by HMRC’s wider penalties review, the department said.

RTI penalty timetable

Feb 2013 - Imposition of late filing and late payment penalties delayed until April 2014.

Feb 2014 - Revised timetable delays automatic late filing penalties until 6 Oct 2014.

Sept 2014 - Automatic late filing penalty regime delayed by an extra five extra months for small companies until 6 March 2015.

Feb 2015 - HMRC announces late payment penalties to be risk-assessed rather than automatic.

The announcement of a third relaxation of the automated penalty regime (see right) suggests that HMRC is continuing to wrestle with RTI data validity issues that would cause mass outrage if they started racking up monthly penalties for thousands of small businesses.

The accuracy of the data going into and coming out of HMRC’s RTI systems took on extra significance this week, as the the government has started the roll out of its new universal credit (UC) system for welfare payments. To ensure that the right benefits are paid, the UC system needs access to up-to-date earnings information from HMRC’s RTI computers.

But comments on AccountingWEB’s previous article on automatic penalties indicated that data discrepancies are still an issue.

When faced with client notices for late payment, Stephen Youngs found that HMRC’s computers continue to show differences in the amounts due from the figures submitted on behalf of employers in their RTI returns.

For Youngs, the problems stemmed from prior-year reconciliations. “If these are going to kick off penalties it will truly be a nightmare. I have found it very difficult to get problems like this resolved, with the people who chase payments not seeming to have access to the same data as the PAYE people,” said Youngs.

On numerous other occasions AccountingWEB members have complained that even though they do not officially have access to clients’ business tax dashboards, they can often show incorrect figures due to double-counting when certain employee information changes and other reconciliation errors. As Stephen Youngs noted, “[HMRC] systems don't seem to communicate, nor do the support staff.”

The automated late filing penalties regime has not been suspended or delayed and will begin in thee weeks. Yet a year on from the first big wave of misdirected penalty warnings, AccountingWEB member Yonder Dave commented that he’s still getting late submission notices for FPSs that have been submitted on time.

On enquiring with the tax office, he noted, “HMRC agreed that the FPS had been received when due but could not see why a notice had been issued.”

The AccountingWEB member’s discussions with HMRC suggested that its RTI system allocates receipts to the oldest overdue amount showing for the current year - but the department is unable to provide a list of payments by date/amount.

“I dread the day penalties start, and the time it will take to get them cancelled,” he wrote.

It now appears that HMRC is paying attention to the problems experienced by AccountingWEB members. Assuming that the issues reported on our site reflect those in the wider business population, the department is wise to do so.

HMRC acknowledged that there have “always been cases where the employer's view and HMRC’s view of what is due are different”. In response, the department is continuing to update its guidance and systems to reduce discrepancies. The most recent examples include revamping the Employer Payment Summary to ensure financial adjustments are applied to the correct tax month and the December 2014 Employer Bulletin advice already quoted. The February 2015 Employer Bulletin includes an article to help employers avoid duplicates.

The HMRC consultation on penalties, meanwhile, will include how it applies penalties for late filing of tax returns and missing payment deadlines. The discussion document raises the possibility of replacing the current regime that ratchets penalties up from £100 to a “penalty points” system where each successive default tots up the points to present a more credible threat to encourage the forgetful to comply, while weeding out deliberate defaulters.

Following the conclusion of the consultation period on 11 May, HMRC plans to review its PAYE penalty processes by 5 April 2016.

Also see:

About John Stokdyk

John Stokdyk, AccountingWEB head of insight

AccountingWEB’s Head of Insight has been with the site since 1999 and likes to spend his time studying accountants’ technology habits. When not nerding out, you can find him exploring obscure indie music and searching for the perfect organic sourdough loaf from his base in Brighton, UK.

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18th Feb 2015 09:26

Really Tedious Interference

 

 

The problem with RTI in-year penalties is that to get a penalty for every (innocent) mistake is a MASSIVE drama for accountants. We do 100 (potty little) payrolls, so we can potentially xx-up 100 times each month depending on pushing various buttons in our software - it's a fritemare for accountants providing payroll services.

Don't play the 'pc' record of "you should organize your systems blah drone drone..." GET IN THE REAL WORLD.

For instance which muppet dreamt up the rule that the RTI filing MUST be done BY THE USUAL paydate - no not AFTER it ? so in the REAL world you run the payroll, then client rings up a couple of days later and says "you left off Doris overtime". Oh ok, we'll re-run playroll and give you corrected listings. Meantime the RTI date has passed technically. So in the actual world we just file RTI the second we run a payroll and don't care we filing twaddle each time. Absolutely no idea how the HMRCy amstrad makes sense of it all.

etc.... ad very nauseum

 

 

 

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By SXGuy
18th Feb 2015 20:07

Well...

The rule is, if you have to correct a payslip, then you ignore the FPS you have already filed, and file a new one on the next paydate with the correct figures.

 

Granted this doesnt help if the FPS you just submitted was Month 12! But then i guess you just refile it and state the reason for it being late.

What annoys me, is certain clients have a lot of employees who just come over from another EU country, while waiting for their NI Number to come through, they are told by DWP they are allowed to work. However the DWP wont give them a temp NI number any longer, and will only post it out to them! This then causes a delay in submitting an FPS because you dont have a N.I Number for the new starter.

 

Selecting "Reasonable Excuse" is an option, but for how long? Is it considered a reasonable excuse that the DWP dont issue NI Numbers the day the new guy sees them, is it a reasonable excuse if they refuse to give the new NI number over the phone for DPA rules? Whos fault is it exactly? Surely not the employer since he may well have done all the reasonable checks and balances to make sure the new guy is allowed to work.

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By NYB
19th Feb 2015 12:15

NIC numbers
NIC NUMBER IS NOT compulsory for new starters. It is about the one thing you can run without.

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By SXGuy
22nd Feb 2015 22:29

Really?

NYB wrote:
NIC NUMBER IS NOT compulsory for new starters. It is about the one thing you can run without.

Then perhaps it is a software issue for me rather than a HMRC issue, because the software we use, will not file an FPS if certain criteria is missing, new or otherwise, And one of those is NIC Numbers.

Looks like i will be contacting tech support in the next few days.

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By NYB
23rd Feb 2015 07:51

Missing NIC numbers
Brightpay and most software providers allow for this.. If your new employee has an NIC number then HMRC a respond with notification within a day or two of you sending an FPS a And also if you are using a slightly incorrect one. It would be virtually impossible to run a high turnover payroll should an NIC number be essential before you run your FPS.

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18th Feb 2015 10:46

.

"HMRC will also close around 15,000 PAYE schemes in March that have not made a PAYE report since April 2013 and which appear to have ceased"

 Did they really not learn from this last time to WRITE FIRST and close later. This caused all sorts of problems last time around. I bet a bunch of these are annual schemes. 

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21st Feb 2015 19:17

PAYE schemes

A senior tax inspector recently informed me that as one of my clients had 6 employees all under the thresholds there was no requirement to file an RTI return. Astonished I asked him how HMRC intended to police such people as they could be working part time for my client, plus part time for several other employers, always under the thresholds, but in total making upwards of £600 a week. I am still awaiting a reply.

Can anyone enlighten me?

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18th Feb 2015 14:39

Earth to HMRC ...

I've said it before and I'll say it again ... let (small) employers file by the 19th and get accurate information ... or force them to file by the pay date and get rubbish which will then be amended later. I cannot believe that the UC system will be so responsive and accurate itself that a 'by the 19th' concession will make a jot of difference.

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By Old Greying Accountant
18th Feb 2015 20:01

THIS IS WRONG ...

... "FPSs are due by the end of the tax month (6 March), but any employer hit with an in-year late filing penalty between 6 October 2014 and 5 January 2015 where they were less than three days late can appeal online against the penalty by completing the “Other” box and adding “Return filed within 3 days”."

NO, FPS's are due on or before the payment to the employee, that is half the problem, if FPS's were due as above as accountants are pleading there would be no problem.

https://www.gov.uk/what-payroll-information-to-report-to-hmrc

As an employer running payroll, you should report your employee’s pay and deductions in an FPS on or before their payday (unless an exception applies).

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By Briar
18th Feb 2015 23:32

3 extra days is not very useful

Why not make it the 19th of the month following as many of us have been asking for (e.g. Douglas Quinton's E.petition which has received 580 responses to date - you can still sign it as it is open until 30/03/15)?

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19th Feb 2015 10:29

Frustration

The increasing penalty regime for the slightest delay or 'error' is beginning to grind people down, or just avoid doing payrolls at all.

£100 for being a few days late paying declaring the payments for your 3 staff is completely out of proportion- I wonder how many employers are asking their staff to become 'self employed' or limited companies to avoid having to run a payroll?

The date should have been the same as the current payment date for the tax, ie 'pay and file' by the 19th.  But some civil servant with no experience of the real world or running a business decided it has to be done on or before you pay the staff and fine you if you are late.

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By ColA
19th Feb 2015 11:36

Tax month - penalty
I have never once filed outside the mandated dates for month end of 5th but have repeatedly had dreaded RTI notes indicating late filing.
The back office process managed by Capita/whoever is a complete farce!

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By KH
19th Feb 2015 14:38

Me, too

ColA wrote:
I have never once filed outside the mandated dates for month end of 5th but have repeatedly had dreaded RTI notes indicating late filing. The back office process managed by Capita/whoever is a complete farce!

Likewise, but I always file before the end of each month for all my payroll clients, receive email confirmation from HMRC, and then just sit back and wait for the RTI late/non-filing generic notice ... which sometimes comes for some clients, sometimes comes for most clients, and always comes for at least one of my clients ... I gave up writing to HMRC about this after month 3 of the PAYE tax year due to not once receiving anything remotely resembling a proper response.

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19th Feb 2015 18:57

You seem to confirm my thoughts

david wilks wrote:

I am ignoring such RTI penalty notices as with any others maintaining late filings. I know I am filing on time and have copies of acknowledgements.

KH wrote:

Likewise, but I always file before the end of each month for all my payroll clients, receive email confirmation from HMRC, and then just sit back and wait for the RTI late/non-filing generic notice ... which sometimes comes for some clients, sometimes comes for most clients, and always comes for at least one of my clients ... I gave up writing to HMRC about this after month 3 of the PAYE tax year due to not once receiving anything remotely resembling a proper response.

As I mentioned in linked comments in the article if everyone is doing this HMRC must be thinking there is no problem. When I called they couldn't tell why the generic notices were being issued so how can they fix a problem that from their end doesn't exist.

And now I have cases where I'm trying to get details of payments received by HMRC and they can't do that. I know the client has paid, I see it on the bank statement, but I can't find out which one has gone astray because I can't get a list of payments received like we did in the past. I have to charge the client for this work so another tax on small businesses?

Why no DD's like VAT? Could it be because of the potential for penalties? I suspect many without agents dealing with this will just end up paying them.

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19th Feb 2015 12:12

Penalties

Still getting penalty notices for schemes that have finished during the tax year and duly advised.

I am ignoring such RTI penalty notices as with any others maintaining late filings. I know I am filing on time and have copies of acknowledgements.

The best ones are for when a CIS scheme stops and there have been no PAYE payments at all. I refuse to open a PAYE scheme in my software just to file nil returns each month. They should separate CIS from PAYE.

 

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19th Feb 2015 16:43

I agree with most of the above posters the only date a penalty should be issued from is the 19th of the month, however, a rather cynical part of me wonders whether the next step will be to drag the payment date to the 5th of the month to coincide with reporting deadline.

Just looking at starting my own practice and payroll is the one area I can see the most issues with as the fines are excessive, and the number of penalty notices issued in error make the work uneconomical.

 

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19th Feb 2015 18:37

One rule for HMRC and another for the taxpayer

I've just noticed on HMRC's guidance page that if you submit a late FPS "on or after the 20th - and you sent a FPS the previous tax month", then HMRC will update their online account "by the 12th of the next tax month", which is up to 23 days later! So, we have to create infallible systems to ensure that we file on or before payday, but HMRC can use the excuse of a late submission to take 23 days to update the online record. That seems a little unfairly balanced to me, especially when what we submit (whether late or not) requires manual, human intervention (which takes time) but is is then sent directly to their servers (which then requires no human intervention by HMRC). Surely, the longest time it should take their servers to update is overnight. And that allows them the luxury of relying on old-fashioned batch-processing, when they should be working in real-time (after all, it is REAL TIME Information).

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20th Feb 2015 07:50

Late Payment

Is it not now the time for the Revenue to adopt the traditional ledger system of accounting so ignoring tax years and with a running balance thus avoiding the problems with miss allocation plus will be better understood by clients.  It would stop the waste of resources when sending out demands when tax has been paid or that there are CIS credits to be set off against any PAYE due etc.

The system really needs to totally overhauled as it is far to complicated for the very small employer.

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23rd Feb 2015 11:40

let's try and untnagle what HMRC are doing....

John did a good job of trying to unravel a rambling press release from HMRC that is confusing in its presentation of several different elements.

1. Late and non filing penalties began in October for employers with 50 or more employees. You can only receive either a non or late filing penalty for a month, not both. A non filing penalty can be received for not filing any, or not filing enough, FPSs based on pay frequency. For the quarter ended December 2014 large employers can only receive a maximum of two penalties as one month is unpenalised. These two penalties can both be appealed if the FPS were sent no more than 3 days late. Late filing is based on comparing the actual filing date of the FPS to any 'payment date' in the file. A payment date is attached to all employee records even those with non-financial entries such as a date of leaving or a name change. Some software attaches the last time the employee was paid to such non-financial entries, not the current period and this will mean the file is treated as late unless a 'late reporting' reason is used (field 154). Many employers/agents do not realise their software works in this way and do not use late reporting reasons. Some software attaches the current period payment date to all entries so no late filing can be trigerred as Iong as you file on or before the contractual payment date. The date that should be in this field can be a mystery too as it's not always the actual date of payment if it falls at a weekend or on a bank holiday - see HMRC's Employer Bulletin of 16th February especially as Easter will trip up folks this year who are using actual payment date rather than contractual payment date.

2. Late filing penalties for employers with less than 50 employees begin in March 2015 and there will be an immediate penalty in month  12 - no unpenalised month. Penalties for month 12 and the January - March quarter for large employers will be issued in late May 2015. If the 3-day tolerance is appropriate, no generic warnings should be issued and no ensuing penalties.

3. All appeals should be done via the new Penalties and Appeals online service accessed by agents through their ID on behalf of clients, they do though need the unique ID from the penalty letter that will have gone to the client. Postal appeals are not advisable as they will simply be keyed into the online service by HMRC staff.

4. In his article John mentions that payments to HMRC are allocated to the oldest outstanding month and year. This is correct but agents and employers will know this has occurred as usually an in-month late payment generic warning will be generated when the reallocatiion is done. Normally late payment warnings are sent around the1st of the month just over a week after the 22nd deadline. Having decided to switch off automated late payment penalties there must be huge numbers of disputed charges, many more than the 12,000 schemes that HMRC wrote to about their dispute last August when the disputed charges team in HMRC were set up. If you have a reconciliation issue access the team via the Employer Helpline and insist a formal dispute is logged to stop warnings, penalties and field force collector visits (bailiffs!)

5. Non-filing warnings are now being issued on 11th of the month allowing agents to send a Nil EPS between 6th and 10th to avoid being deluged with warnings, Nil EPS can still of course be sent up to and  including 19th to disapply the non-filing warning.

6. I'm afraid I don't find the section in the Bulletin on duplicate records at all helpful. Payroll software is automated so we cannot control when data is sent. To exhort employers (as HMRC  have done many times since RTI began) not to submit accurate data to HMRC as to do so can cause their systems to corrupt (duplicate) records is staggering. The whole purpose of  RTI was to improve the accuracy of HMRC's PAYE data. This flawed guidance is only being repeated now because duplicate records are an issue for HMRC, taxpayers, employers and of course Universal Credit claimants since the national rollout began last week.

Kate Upcraft

Chair RTI Stakeholder taskforce

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25th Feb 2015 14:55

RTI woes

At one time I could do all of my payrolls in one hit, job done and forget it.  Now, with RTI, nil EPS's can only be submitted after the end of each tax month which elongates the time spent on payroll work.  And of course in the meantime those generic notices roll in reminding me of what I already know.  Needless to say I have signed Douglas's petition! 

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By NYB
25th Feb 2015 15:20

Ever increasing work
Oh I so agree. This EPS thing is stupid. With a small payroll bureau I have a check list for each client. There are more and more boxes that seem to need ticking.

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25th Feb 2015 19:40

Nil activity EPS can help

One solution is to set a nil activity EPS for the whole tax year for any clients that may not pay each month (one job, not 12) then when they do actually require an FPS that will just overwrite the Nil EPS. It will protect you from those darned GNS and the danger of forgetting to do one and getting a penalty from March 

Kate Upcraft

 

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19th Mar 2015 06:16

Great tip!

I will do a blanket nil EPS for every client on 10 April or whenever this stupid system comes back online again.

To be honest I don't give a stuff whether HMRC's records are accurate or not, they have lost all support from me on RTI over the way they have handled a raft of issues on it.  So if a client tells me about adjusted hours on a payslip already submitted, tough luck HMRC I am sending you a re-submission so deal with it.

The fining regime is, of course, part of this.  I am not going to get any client fined.  So if I know a staff member has worked hours but that person is missing off what the client has sent me and we are close to the payroll period end, bang!  In it goes with an estimate.

Then when the real numbers come in, bang! In they go as a re-submitted FPS.  If the deadline was relaxed to "submit by 19th of following month" I would not be behaving like this, I would not go bang! with the estimate but I would wait until the real data came in.

So in a nutshell it's pointless moaning about this kind of thing HMRC, YOU are the people who have created this mess.

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