Payroll, Real Time Information and Penalties for Non-Compliance

Real Time Information (RTI) became compulsory for most employers on 5th April 2013. There were some ‘relaxation of rules’ periods for smaller businesses up until October 2014, after which all businesses have had to comply. As an outsourced payroll services provider for SMEs, we thought we would just remind you what RTI is and what the penalties are for non-compliance.

What is RTI?

Under RTI employers submit payroll information to HMRC in real time, rather than at year end, on the day or before when employees are paid – weekly, fortnightly, 4 weekly or monthly. Real Time Information doesn’t change the way businesses calculate PAYE. It simply changes when submissions must be made to HMRC. In addition, employers are no longer required to submit the following forms: P14 and P35, or the employee starter or leaver forms P45, P46 and P46 (pen).

Sounds simple, doesn’t it? But are you aware what the penalties are for non-compliance?

Late Payment Penalties

As always with HMRC, there are penalties for late payment of employer PAYE/NI taxes under the RTI regime, whether paid monthly or quarterly.

Since April 2015, If the difference between an employer’s payment and the amount reported to HMRC is greater than £100, then automatic in-year penalties can be applied, based on the number of late payments. Despite the many millions of payroll returns they deal with, in our experience, HMRC will catch up with late payers at some stage. Computerisation means they are much quicker now.

So what are the current penalties for 2016/17?

  • Late filing of in-year Full Payment Submissions and Employer Payment Summaries

All employers may be up to 3 days late in filing returns without penalty until further notice from HMRC.

  • Late filing – final submission

There is a penalty under schedule 55 of the Finance Act 2009, currently at £100 per 50 employees for each month.

  • Inaccurate returns

A penalty under Schedule 24 of the Finance Act 2007 applies to both in-year submissions and the final Full Payment Submission of the year. The language HMRC uses can be quite cold and disconcerting:

“When a taxpayer makes an error in a tax return or document (an inaccuracy) and this amounts to, or leads to:

  • An understatement of his/her liability to tax;
  • A false or inflated statement of a loss by him/her; or
  • A false or inflated claim to repayment of tax.

A penalty is charged per error.”

They go on to say that:

  • “Each error has to be looked in isolation in order to determine its category and the behaviour that contributed to it.
  • There will only be a penalty if the error could have led to a potential loss of revenue.
  • Once evaluated errors may be grouped to simplify calculation.”

The best thing to do, of course, is avoid inaccurate returns.

  • Late payment of PAYE/NI

Penalties apply under the existing rules in Schedule 56 of the Finance Act 2009, and automatic in-year penalties apply from April 2015. There are concessions for IR35 companies.

Late payment applies to:

  • PAYE (including PAYE Settlement Agreements and determinations).
  • National Insurance contributions
  • Construction Industry Scheme deductions
  • Student Loan deductions

We Can Help Make Things Easier

This is just the tip of the iceberg when it comes to RTI, all the rules that go with it and the potential penalties. If you run a smaller business and you don’t have an in-house finance or HR department to deal with your payroll, why not consider outsourcing it?

Contact us or call us on 0121 422 0550. As an outsourced payroll provider we deal with everything that HMRC wants when it comes to payroll, leaving you to get on with running your company. Have a look at our testimonials.

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