Taxman unveils RTI penalty plans

Real time reporting of payroll data starts in full next April and tough penalties were threatened for employers who don’t comply. What’s the latest on this?

From April 2013, employers must send, via the Internet, details of salary, tax deducted, NI, etc. to the Taxman each time they pay an employee, instead of just at the end of the tax year. One advantage to this is that you won’t need to complete the end of year return Forms P35 or P14. Naturally, as these are being scrapped so are penalties for submitting them late. The trouble is that tough new penalties for missing Real Time Information (RTI) deadlines will be imposed instead.

In April the Taxman issued a lengthy consultation paper suggesting how and when the new penalties would apply. He wanted these to be automatic with little room for an appeal. This, and other aspects of the consultation, rang alarm bells with tax professionals. Organisations like the Chartered Institute of Taxation wanted a bedding-in period before penalties took effect.

It seems that the Taxman does listen once in a while. On November 29 he announced that late notification penalties won’t apply for the first year of RTI. Instead, the Taxman will work on a fair and practical way for these to be imposed from April 2014. While employer payroll data reports, so-called Full Payment Submissions, won’t be subject to fines if they’re late in the first year of RTI, the Taxman says that he’ll continue to charge penalties under existing rules on employers who make PAYE errors.

Interest and penalties on late PAYE tax and NI payments won’t be affected by RTI. But employers need to be aware that RTI will make it simple for the Taxman to check that the payments due are being made on time. Even those a day late can result in a fine, so make sure your payroll staff are aware of this.