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HMRC confirms further delay to ‘on or before’ penalties

April 28, 2015

 

HMRC has published further guidance on its changes to RTI late filing penalties. This clarification follows HMRC’s last minute announcement on 17 February of a considerable softening of its original penalty policy for employers filing RTI returns late. Yesterday’s announcement, published via Gov.uk, confirmed February’s guidance that a 3-day tolerance applies to all RTI late filing penalties, and went further saying that this 3 day window before a penalty is triggered will apply will for the whole of 2015/16.

Automated RTI late and non-filing penalties now apply to all employer PAYE schemes. It appears that with this announcement HMRC has finally arrived at a settled position on late reporting penalties.

HMRC originally declared its automated late filing penalty regime would commence from the start of RTI. This was delayed by one year until 6 April 2014 and on 12 February 2014 HMRC again announced a further 6 month delay until 6 October 2014.  Then, with less than a month to the proposed October start date, in September 2014 HMRC announced penalties would only apply to employers with more than 50 employees – representing less than 10% of all UK employers – and the start date for the remainder would be delayed until 6 March 2015.

HMRC also intended that employer penalties for both late payment of PAYE due (based on RTI returns) and late, non-filing penalties would be fully automated. February’s announcement that late payment penalties will now be ‘risked assessed’ means that only late and non-filing RTI penalties will be generated automatically by its systems and only then after the expiry of the 3 day grace period.

In summary, HMRC’s late, non-filing of the Full Payment Submission (FPS) penalty regime for all UK employers now applies if:

  • The FPS is not sent within 3 days of the earliest Payment Date that is declared in the submission;
  • HMRC’s filing expectation is not met; and
  • The employer fails to advise HMRC no FPS was due for the period (using the Employer Payment Summary (EPS) to advise no payments were made).

HMRC will only levy one penalty for each tax month regardless of the number of defaults in the tax month, for example, employers running payroll weekly. However this means that for a weekly payroll where HMRC expects at least 4 FPSs in the tax month, the same ‘monthly’ penalty will apply if just one weekly FPS is late (or not filed) i.e. the same level of penalty as if all 4 were late. 

The actual amount of the penalty charged is determined by the number of employers in each PAYE scheme and HMRC will use the most recent information available to it (from employer reporting) to determine the size of the late filing penalty for each tax month using the following bands:

Number of Employees

 Late Filing Penalty pm

1 to 9

£100

10 to 49

£200

50 to 249

£300

250 or over

£400

 

HMRC will not charge a penalty to a new employer submitting a first FPS unless the FPS is received more than 30 days after paying the first employee for the first time. HMRC will also not penalise any employer for their first failure in any tax year: the first failure is noted but not chargeable. However smaller employers have no grace first default in the 2014-15 tax but will in the 2015-16 tax year. This is because of the staggered start to the late filing regime for large and smaller employers from, respectively, October 2014 and April 2015. HMRC’s reasoning that smaller employers with less than 50 employees in the tax year ending 5 April 2015 should be at risk of a penalty for their first late return from 5 March 2015 appears to be so that it can maintain penalties commenced for all UK employers in the same tax year.

However, HMRC’s announcement of the 3-day reporting tolerance and its retrospective application to 6 October 2014 means that all employers are entitled to appeal any penalties that would not have been incurred had the 3-day reporting rule been applied by HMRC’s systems from that date. Employers should appeal these penalties using HMR’s online Penalties Appeals Service (PAS) entering the reason code ‘Other’ and ‘return filed within 3 days’.

The 3 day tolerance also applies to HMRC electronic RTI GNN warning messages (Generic Notification Notices) which from March 2015 will only be sent where any FPS payment date is more than 3 calendar days prior to the actual FPS filing date and no late reporting reason is set against that date to apply the 3-day tolerance.

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