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HMRC responds to RTI Pilot participants’ penalty fears

April 30, 2013


HMRC have created a potential RTI penalty liability for employers participating in the RTI pilot despite their assurances to the contrary. When HMRC framed its RTI penalty regime it stated it was motivated to avoid unfairly penalising employers who had participated in the pilot while the majority of employers who had not taken part would avoid any liability to penalties.

However it has emerged that this is the situation facing potentially thousands of employers enrolled without their knowledge by HMRC into RTI. The anomaly has come to light as employers who were unwitting participants in the RTI pilot attempt to file a P35 or P14 return for 2012/13 only to have it rejected because they are already in RTI. RTI requires for all in year reporting to have been finalised by 19 April.  Under the old PAYE rules employers not in RTI would have had until the 19 May 2013.

Rebecca Benneyworth, the Deputy Chair of the ICAEW Tax Faculty, explained that throughout the 2012/13 tax year all new PAYE schemes were given the choice as to whether to join RTI or not, in advance of 6 April 2013 compulsory joining date. “At some point that choice disappeared, and it’s obvious [that HMRC] was not clear enough.”

Under RTI the deadline for a final in year PAYE filing has changed to 19 April, instead of the original annual deadline of 19 May. Employers who were unaware they were already in RTI now face a potential liability to a penalty for the late filing of their final period return for the 2012/13 year. HMRC have sought to reassure employers, saying that “Penalties are not changing – HMRC is treating pilot employers in the same way as we will treat non-pilot employers” but the onus clearly remains on these employers to take the necessary steps to avoid a late filing penalty notice.

Rebecca Benneyworth explained that “If you have missed the 19 April deadline for filing a full payment submission with the 'final payment of the year' indicator set, you can file the EYU under RTI, or ring the new HMRC employer helpline (0300 200 3211) and ask them to reset the scheme’s RTI commencement date to 6 April 2013".

“That will allow [employers] to file P35 and then go into RTI,” she said.

However, even for employers aware of their participation in the pilot HMRC’s own Earlier Year Update tool for its Basic PAYE Tools free software was not ready in time for the April deadline, causing problems for many users and concern over possible late filing penalties.

In guidance issued to employers who were enrolled in the RTI pilot HMRC clarified its position, saying:

“An employer who fails to deliver a final FPS by 19 April 2013 will not be able to file a 2012-13 FPS after that date, but should instead file an EYU."

However, as the EYU functionality was not included in the current RTI version of BPT, those employers who have not met their 2012-13 End of Year filing obligations by submitting an appropriate FPS or EPS and cannot submit an EYU from their payroll software will not be able to meet the 19 May deadline by filing an EYU using the BPT.  Because of the delay in functionality release, the employer will not be able to file an EYU using the BPT until the end of May and they may become liable to a late filing penalty as a result.”

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