Penalties for late real-time PAYE returns to be phased in

Employers with fewer than 50 employees will face automated in-year penalties for late real-time PAYE returns from 6 March next year.

Those who employ 50 or more people will face penalties from 6 October 2014.

HM Revenue and Customs (HMRC) will send electronic messages to all employers shortly to let them know when the penalties will apply to them, based on the number of employees shown in the department’s records.

Ruth Owen, HMRC Director-General for Personal Tax, said:

”Real Time Information is working well. Our most recent figures show that over 95% of PAYE schemes making payments to individuals are successfully reporting in real time, and 70% say that it is easy to do.

“We know from our experience of rolling out of RTI that to ensure a smooth transition for our customers it’s best to introduce changes in stages. This will allow us to update our systems and enhance our guidance and customer support as needed. We know that those who have had most difficulty adjusting to real-time reporting have been small businesses, so this staged approach means they have a little more time to comply with the new arrangements before facing a penalty.

“We believe this is the best approach for HMRC and our customers, as we all get used to the new in-year penalties.”

Where employers believe they have a reasonable excuse for sending a return late, they will be able to appeal using HMRC’s new, online appeals process for automated penalties. This should speed up the appeal process for businesses and HMRC.

In the run up to March 2015, HMRC will examine other ways to encourage employers to comply with the rules, in addition to financial penalties.

Notes for Editors

1.  In February HMRC announced a staggered start to the new, automated penalties for PAYE reported in real time -  https://www.gov.uk/government/news/hmrc-unveils-new-timetable-for-rti-penalties

2.  The new in-year penalties will be issued quarterly, with the first penalty notice being issued early in 2015. They replace the end of year penalties, which apply up to the 2013-14 tax year.

3.  HMRC will issue end of year penalties for employers who it believes failed to send their final submission for 2013-14 on time later in September 2014.

4.  More information about the new in-year penalties -  https://www.gov.uk/what-happens-if-you-dont-report-payroll-information-on-time

5.  HMRC will update its penalty guidance shortly. The new online appeals service and HMRC’s Generic Notification Service (GNS), which enables HMRC to send electronic messages to employers, are available within PAYE Online. Employers can read https://www.gov.uk/paye-online/desktop-viewer

6.  HMRC’s PAYE Online services login page - https://online.hmrc.gov.uk/login?GAREASONCODE=-1&GARESOURCEID=Common&GAURI=https://online.hmrc.gov.uk/home&Reason=-1&APPID=Common&URI=https://online.hmrc.gov.uk/home

7.  Real Time Information (RTI) represents the biggest change to the payroll system in over 60 years. It is designed to reflect the labour market fluidity of the 21st century and deliver improved accuracy to employers and employees. RTI means employers and pension providers report deductions and payments they make to HMRC at the time they are made, rather than after the end of the tax year. This enables the tax system to better ensure the right tax is being taken at source.

8.  The RTI pilot was launched in April 2012 with just 10 employers, and now more than 99% of PAYE records are reported in real time.

9.  Up to 19 May 2014 HMRC successfully received 35.4 million Full Payment Submissions and 742 million payments for 2013-14. Some 99.5% of individual PAYE records are being reported in real time. Some 1.8m (95%) of PAYE schemes with employees/ pensioners are reporting over 99% of individual PAYE records.

10.  Reporting PAYE in real time on or before each payment date improves benefit administration, making it easier for Universal Credit claimants.

11.  Further information about operating PAYE in real time - http://www.hmrc.gov.uk/payerti/index.htm

12.  Follow HMRC’s Press Office on Twitter @HMRCpressoffice

13.  HMRC’s Flickr channel www.flickr.com/hmrcgovuk