The new RTI PAYE system poses challenges for many employers and one of the questions they have been asking is "will they be penalised if they make a mistake?"
Until recently there has been a fair amount of uncertainty forthcoming from HMRC on this matter, but finally they have now published guidance on how penalties for 2012/13 and 2013/14 will be applied where a return is late or inaccurate - a resumé follows.
From April 2013, almost all employers and pension providers will be required to report PAYE in real time. This means that information about all PAYE payments needs to be submitted to HMRC online on or before the time employees are paid, rather than at the end of the year as they are now.
The submission an employer has to make on or before each pay day is called the Full Payment Submission (FPS).
Late returns 2012/13 and 2013/14
There will be no change to the penalties where returns for the tax years 2012/13 and 2013/14 are filed late. The current penalty regime will continue to apply at the tax year end. There will be no penalties if in-year Full Payment Submissions (FPSs) are submitted late.
Note that although RTI doesn’t start officially until April 2013, HMRC has been running a pilot for some time now on which many employers have already been enrolled. It would have been rather hard if these pioneering volunteers were to have been subjected to new penalties in 2012/13. Also, some large employers are not joining RTI until after April 2013. By October 2013, all employers will be operating under the new rules, but again, it seems sensible to wait until everyone is on board before imposing new penalty rules.
Employers and pension providers must submit an FPS 'on or before' they pay an employee or pensioner. If they still have information to send after 5 April, they can send this on an FPS until 19 April, but then will use an Earlier Year Update after that. To avoid a late filing penalty for 2012/13 and 2013/14, they must report the final payment made to an employee or pensioner by 19 May following the end of the relevant tax year.
Inaccurate returns 2012/13 and 2013/14
HMRC will not charge penalties for inaccuracies identified on in-year FPSs for 2012/13. However, penalties may be charged after the end of the tax year, based on the final FPS for the year. So this means that the rules for getting it wrong for the year overall are very like the existing penalty rules for 2012/13.
Penalties for inaccuracies may apply to in-year returns from the 2013/14 tax year. HMRC will use the same considerations which apply now under Sch 24, Finance Act 2007 and continue to use a risk-based approach to identify employers who may be submitting incorrect returns.
Guidance is published in the guide ‘What happens if you don’t report payroll information on time’.
Late payment of PAYE
PAYE and NIC must continue to be paid in full as they are deducted through the tax year. RTI submissions will make it very clear to HMRC how much it can expect from employers each month. Late payments will be very obvious. HMRC’s guidance states the following:
- Underpayments 2012/13
From Monday 19 November 2012 HMRC started contacting employers with apparent underpayments to help them get up-to-date and on the right lines with their payments.
- Late payment penalties 2012/13 and 2013/14
For the tax years 2012/13 and 2013/14, HMRC will continue to use a risk-based approach to identify employers who are not complying with their payment obligations and who therefore might be liable to late payment penalties. Where employers who are not complying with their obligations are identified, late payment penalties may be charged.
HMRC will notify employers who may have defaulted on either a filing or payment obligation as soon as possible to enable them to get back to compliance quickly and avoid any further penalties for future failures.
PAYE/National Insurance payments and deadlines
For further information on payment of PAYE, please link to HMRC website as shown below:
• For reporting in real time - PAYE/National Insurance payments and deadlines
• For current system - PAYE PAYE/National Insurance payments and deadlines
Any queries, do get in contact with us to see if we can help you.