Delays to the RTI penalty train

New automatic in-year Pay As You Earn (PAYE) penalties for late filing and late payment and in-year interest (charged on tax and National Insurance Contributions (NICs) that are paid late during the year), were due to start from 6 April 2014. Two elements have now been delayed namely, the late filing penalties and alterations in the operation of the late PAYE payment penalties.

Late filing

For 2014/15 and onwards late filing penalties apply on a monthly basis for each PAYE scheme where an employer fails in a given month to make an appropriate RTI return on or before the filing date.

The first tax month of failure will be ignored with the exception of an employer operating an annual scheme. The Regulations set the level of penalties by reference to the number of employees and/or the number of previous penalties for late filing incurred in the same tax year. This means that where returns are required monthly due to employees being paid at least monthly, late returns could result in eleven penalties!

The penalty levels are:

• £100 for schemes with 1 - 9 employees
• £200 for schemes with 10 - 49 employees
• £300 for schemes with 50 - 249 employees and
• £400 for schemes with 250 or more employees.

A 5% tax geared penalty may also apply if a return is more than 3 months late.

These automatic penalties are now set to apply from 6 October 2014 and will be issued quarterly so the first penalty notices for the quarter 6 October to 5 January will be issued in the New Year!

Late payment

For 2014/15 and onwards automatic interest will be charged for late payment of PAYE income tax and NIC. The current system of risk based late payment penalties continues for 2014/15. This means that penalties will continue to be levied once the tax year has been completed for 2014/15. The change to automatic in-year quarterly late payment penalties will now not apply until 2015/16 and onwards.

It is important to avoid these penalties by ensuring that PAYE matters are completed on a timely basis and we are happy to assist in this area.