Winter 2013 Newsletter
RTI developments keep on coming
It is probably fair to say that the biggest change to the PAYE system has gone quite well for those employers that prepared for it. The technology seems robust and there have been no 'crashes' of the system. However, it is also clear that many smaller employers have not really started to get to grips with RTI.
HMRC also know this, which explains the announcement that the temporary relaxation of the new rules for businesses with fewer than 50 employees has been extended until April 2014. The effect of the relaxation means that a small business paying employees is permitted to submit only one report under RTI a month, rather than all the reports which may be required. However, this is all a bit of a red herring, as HMRC has previously announced that there will be no penalties for late filing of RTI returns for 2013/14, provided that the employer has submitted the final report of payments made to employees by 19 May 2014. What does appear clear, though, is that the gloves will be off from April 2014 when late return penalties will be levied, although the level of penalties has yet to be announced.
In a second development, HMRC now appear able to process requests for annual PAYE schemes. HMRC are keen to emphasise that annual schemes only apply where:
- ALL the employees are paid annually in the same month and
- the employer is required to pay HMRC annually.
This reduces the number of RTI returns required from 12 to only one.
Finally, it has always been clear that the RTI system is not directly linked to the HMRC system that records PAYE payments. Over time this will happen but RTI highlights the tax which is due and when it is due. There are stringent PAYE late payment penalties which are structured on a sliding scale. The more late payments in a tax year, the larger the percentage penalty applied to the aggregate of the late payments. The first default in any year is disregarded altogether. The remaining defaults trigger a penalty of 1%, 2%, 3% or 4% depending on their number. A 4% penalty is payable if there are ten or more defaults during the tax year. The penalties can be large and HMRC also have the power (although it has not started yet) to impose interest on the late paid PAYE. The moral is clear - ensure that PAYE is paid on time before the chickens come home to roost.
There are many PAYE related issues that occur, so if we can be of help with these or any other matters, please do not hesitate to contact us.