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New RTI penalty consultation launched by HMRC

November 29, 2013


HMRC has launched a further two month consultation on proposed changes to PAYE legislation concerning the RTI penalty regime. This final consultation on penalties comes 4 months before the penalty regime for RTI comes into force from April 2014.

The penalty regime for RTI will impose different levels of penalties depending on the size of the employer’s PAYE scheme.  For late filing of RTI returns, the penalty system will use the following size bands:

  • a scheme with 1 to 9 employees will face a penalty of £100;
  • £200 penalty for schemes of 10 – 49 employees;
  • £300 for 50 – 249 employees and
  • £400 for the biggest schemes with 250 or more employees.

Employers will be allowed one un-penalised default each tax year, unless they operate an annual PAYE scheme, in which case the late filing penalty will apply even if it is the first default.

A new employer will be allowed a thirty day ‘initial period’ in which to make their first RTI submission after paying their employees for the first time under regulation 67K.  Provided the employer files their RTI reports within the thirty day period, they will not receive a late filing penalty.

The document also sets out some changes to the late payment penalty regime which will apply from April 2014.  HMRC has the power to set a ‘payment tolerance’, a value within which a late payment default will not be generated.  This allows for instances where rounding of values in payroll generation or other minor adjustments mean that the amount HMRC is expecting from reporting does not exactly tally with what the employer pays.  Regulation 67L of the proposed changes will set this tolerance at £100, so payments which differ from expected amounts by less than £100 will not generate a late payment default or a penalty.

Some of the changes outlined in the document are designed to make sure that the penalty guidance applies both to PAYE and National Insurance contributions.  The draft also makes provision for those few employers who are not required to file RTI returns online, but who use paper forms, to report quarterly to HMRC.

The changes described in the consultation document also provide for instances where it is impractical for an employer to operate PAYE, and HMRC makes arrangements for a ‘Direct Collection’ procedure whereby PAYE and NICs are taken directly from the employee.  This may arise where the employer is based overseas and no special arrangements have been made to otherwise gather taxes due.  Under a Direct Collection procedure the employee must electronically file report RTI information to HMRC, and can be liable for penalties should they fail to do so. 

The consultation document outlines the changes to existing PAYE secondary legislation which will come into effect from 6 April 2014. HMRC is requesting feedback on the draft regulations, which should be emailed to  The consultation period will close on 24 January .

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