UK RTI penalties: Here today, gone tomorrow? UK RTI penalties: Here today, gone tomorrow?

UK RTI penalties: Here today, gone tomorrow?
31 Aug 2015

On 17 February 2015, HMRC announced a three-day easement to the RTI ‘on or before date of payment’ rule. This took effect from 6 October 2014 having been backdated for employers, with 50 or more employees who had already had penalties for the period 6 October to 5 January - or had they?

On 8 June 2015, penalties for quarter four (6 January 2015 to 5 April 2015) for large employers and month 12 for those with less than 50 employees began to arrive with employers and agents.

Of the ones that I have seen, there are a few oddities that hopefully HMRC will clarify in guidance and ahead of the next batch (assuming there are any more):
• Penalties came into effect from 6 October 2014 for large employers and this was due to be the first unpenalised month, but I have seen penalties charged for October
• Some notices show a default with no penalty which is what I would have expected ie it was a default so you have used your unpenalised month
• Penalties have not been preceded by a Generic Warning Notice in all cases.

It is also not clear what failure the penalty is for, remember these are both late and non-filing penalties. The definition of late is that:
• There is a ‘payment date’ attached to an employee record that is more than three
days before the actual filing date of the FPS
• The scheme has not used a late reporting reason to either exceed the three-day easement or replace it with another exemption from penalties eg correction to previous period.

The definition of non-filing is:

• There has not been a return for the tax month
• There has been no ‘nil payment’ or ‘nil activity’ EPS filed for that tax month
• There have been insufficient FPSs filed for the tax month based on HMRC’s filing expectation for the scheme.

HMRC’s filing expectation is based on pay frequency ie four per tax month for a weekly pay frequency. It may be that their systems are not sophisticated enough to detect that just because an employer sent four FPS’s (three for monthly pay groups and one for quarterly paid employees) for a month, the following month only three are due as the quarterly paid employees are not due to be paid.

A nil EPS can’t be sent in this situation, as there are FPS’s due to be sent for some employees within the PAYE scheme. This could then generate a non-filling penalty that is not due and must be appealed.

If you have received a penalty and believe it to be incorrect you should appeal it using the new online Penalties and Appeals Service (PAS). This is accessed through PAYE online and is available to agents as well as employers using the unique Id on the notice to select the correct penalty.

Do ensure you take a screen print of the appeal as you will not be prompted to do so and once the appeal has been made the penalty will disappear from PAYE Online, so your screen print will be the only proof you have appealed. The reference number that is displayed on the screen cannot be used by HMRC to find the appeal.

Once the appeal is lodged, there is a drop down menu to choose the reasonable excuse as well as a free form text box, you should receive either:

• A generic notice saying that the appeal has been accepted which will be followed by a postal notice cancelling the penalty
• A generic notice saying that the appeal has been referred for further investigation.

Despite the penalty notice saying you should pay within 30 days this is not necessary if you have lodged an appeal.

Given the decision to accept all SA penalty appeals I expected that HMRC would have set the business rules with the PAS to auto-accept all appeals, but that isn’t my experience so far. I wonder how they have the resources to deal with RTI appeals that are referred for clerical investigation and not SA appeals? How long will the investigations take and will interest be added to the outstanding penalties or do HMRC stop that accruing as they know an appeal has been lodged?

I have also seen appeals that have been rejected after clerical investigation for the 5 January quarter that do not alert the employer to the fact that it is still an option ask for an internal review by a second HMRC officer of the rejected appeal.

So what of the future of RTI penalties? HMRC have just concluded a consultation on scrapping low value penalties that do not influence compliant behaviour. An announcement on RTI penalties was released on 17 June stating that ‘HMRC has now issued the first in-year penalties notices to employers with fewer than 50 employees who missed the deadline for sending PAYE information to HMRC’.

By Kate Upcraft

On 17 February 2015, HMRC announced a three-day easement to the RTI ‘on or before date of payment’ rule. This took effect from 6 October 2014 having been backdated for employers, with 50 or more employees who had already had penalties for the period 6 October to 5 January - or had they?

On 8 June 2015, penalties for quarter four (6 January 2015 to 5 April 2015) for large employers and month 12 for those with less than 50 employees began to arrive with employers and agents.

Of the ones that I have seen, there are a few oddities that hopefully HMRC will clarify in guidance and ahead of the next batch (assuming there are any more):
• Penalties came into effect from 6 October 2014 for large employers and this was due to be the first unpenalised month, but I have seen penalties charged for October
• Some notices show a default with no penalty which is what I would have expected ie it was a default so you have used your unpenalised month
• Penalties have not been preceded by a Generic Warning Notice in all cases.

It is also not clear what failure the penalty is for, remember these are both late and non-filing penalties. The definition of late is that:
• There is a ‘payment date’ attached to an employee record that is more than three
days before the actual filing date of the FPS
• The scheme has not used a late reporting reason to either exceed the three-day easement or replace it with another exemption from penalties eg correction to previous period.

The definition of non-filing is:

• There has not been a return for the tax month
• There has been no ‘nil payment’ or ‘nil activity’ EPS filed for that tax month
• There have been insufficient FPSs filed for the tax month based on HMRC’s filing expectation for the scheme.

HMRC’s filing expectation is based on pay frequency ie four per tax month for a weekly pay frequency. It may be that their systems are not sophisticated enough to detect that just because an employer sent four FPS’s (three for monthly pay groups and one for quarterly paid employees) for a month, the following month only three are due as the quarterly paid employees are not due to be paid.

A nil EPS can’t be sent in this situation, as there are FPS’s due to be sent for some employees within the PAYE scheme. This could then generate a non-filling penalty that is not due and must be appealed.

If you have received a penalty and believe it to be incorrect you should appeal it using the new online Penalties and Appeals Service (PAS). This is accessed through PAYE online and is available to agents as well as employers using the unique Id on the notice to select the correct penalty.

Do ensure you take a screen print of the appeal as you will not be prompted to do so and once the appeal has been made the penalty will disappear from PAYE Online, so your screen print will be the only proof you have appealed. The reference number that is displayed on the screen cannot be used by HMRC to find the appeal.

Once the appeal is lodged, there is a drop down menu to choose the reasonable excuse as well as a free form text box, you should receive either:

• A generic notice saying that the appeal has been accepted which will be followed by a postal notice cancelling the penalty
• A generic notice saying that the appeal has been referred for further investigation.

Despite the penalty notice saying you should pay within 30 days this is not necessary if you have lodged an appeal.

Given the decision to accept all SA penalty appeals I expected that HMRC would have set the business rules with the PAS to auto-accept all appeals, but that isn’t my experience so far. I wonder how they have the resources to deal with RTI appeals that are referred for clerical investigation and not SA appeals? How long will the investigations take and will interest be added to the outstanding penalties or do HMRC stop that accruing as they know an appeal has been lodged?

I have also seen appeals that have been rejected after clerical investigation for the 5 January quarter that do not alert the employer to the fact that it is still an option ask for an internal review by a second HMRC officer of the rejected appeal.

So what of the future of RTI penalties? HMRC have just concluded a consultation on scrapping low value penalties that do not influence compliant behaviour. An announcement on RTI penalties was released on 17 June stating that ‘HMRC has now issued the first in-year penalties notices to employers with fewer than 50 employees who missed the deadline for sending PAYE information to HMRC’.

By Kate Upcraft