The new RTI and PAYE late payment penalties timetable

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The 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), started from 6 April 2014. Real Time Information (RTI) is a big change and while some employers are continuing to learn, HMRC decided to stagger the start of the new in-year late filing and payment penalties to give employers more time to adapt to reporting in real time.

The staggered timetable is now:

  • From April 2014 – if employers file RTI late up to October they’ll only be charged interest.
  • From October 2014 – if employers file and pay RTI late they’ll only be charged a penalty for filing late.
  • From April 2015 – there will be an automatic penalty for late payment of payroll tax and contributions.

HMRC has stated that it is continuing to improve its systems and guidance and admits that some employers need time to continue to learn about the new systems. HMRC has worked closely with the Department for Work and Pensions (DWP) to ensure that RTI will support the operation of Universal Credit, which brings together means-tested and out-of-work benefits. HMRC has indicated that it is aware that while improvements to its internal systems are working, there is more to be learnt from the early operation of the changes in order to provide better customer support to employers who need more time to adapt.

Earlier this year, Colin Ben-Nathan, Chairman of the Chartered Institute of Taxation Sub-Committee for Employment Taxes, welcomed the penalty delays as a “constructive move” on HMRC’s part that will give both employers and HMRC time to bed down what is a fundamental change to the PAYE system.

Mr Ben-Nathan went on to say: “It will also help to reassure employers that HMRC does not establish deadlines in an arbitrary manner but is responsive to the concerns and realities of those on the ground. There are also still some problems with RTI itself which need to be addressed by HMRC. And so we think it is absolutely right that the imposition of automatic penalties should be delayed until these problems are fully investigated and resolved.”