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Further delay in RTI penalties for small employers

September 10, 2014


HMRC announced yesterday that automated penalties for late and non-filing of RTI returns will be delayed until March 2015 for employers with fewer than 50 employees.  Automated in-year penalties will commence for large employers as planned from the 6th of October 2014, but the delay means that the majority of employers will have had almost two years under RTI without being subjected to automated penalties by the time these are made live in March 2015, thanks to the delay announced in February this year plus this further postponement.

HMRC will use its records to establish which businesses have more than 50 employees and will issue further communications this month to alert these employers to their October penalty commencement date.  HMRC has confirmed that it will be using the troubled Generic Notification Service to communicate with employers about penalty regime start dates, despite problems with ensuring accurate targeting and wording of these notices in the past.  

Payroll expert and member of the HMRC RTI task force Kate Upcraft, posting on her website, explained that employers will be able to contact HMRC if they believe that they should not be included in the large employer group when penalties start.  Upcraft also notes that, as originally planned by HMRC, employers with a penalty start date of October will not be penalised for their first filing default.  However, this exception will not apply to small employers with a March 2015 penalty start date.  GNS messages warning that penalties will be applicable from October will be sent to those large employers who have received a late/non filing GNS this tax year from the 19th of September onwards according to Upcraft’s blog post. 

Commenting on the press release’s references to HMRC plans to “examine other ways to encourage employers to comply with the rules, in addition to financial penalties”, Upcraft says that she “understand[s] this to be the way that the hash cross reference can be used to assist with proving compliance" (via BACS payments to employees), and promises to provide more information when it becomes available.

HMRC’s Ruth Owen, quoted in the press release, reiterated HMRC’s reasoning for the previous penalty deferral when commenting on this further delay, saying “We know that those who have had most difficulty adjusting to real-time reporting have been small businesses, so this staged approach means they have a little more time to comply with the new arrangements before facing a penalty.”  Owen also states that the extra time will allow HMRC to “update [their] systems and enhance [their] guidance and customer support as needed.”

The editor of AccountingWEB, John Stokdyk, asks why this phasing in of penalties has been set out so close to the date penalties were supposed to start, and AccountingWEB have contacted HMRC to request clarification on some of the “questions raised by yesterday’s announcement”.  Stokdyk says that “yet another change of tack on penalties indicates that HMRC is not yet confident enough of its data quality to pull the [lever] and set off a torrent of wrong automatic fines.”

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