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.
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.