RTI Penalties Apply to You Too

PAYE penalties just around the corner

From 6th March of this year, Real Time Information (RTI) filing penalties will apply to PAYE schemes with 49 or fewer employees and that means contractors are no longer exempted. As from that date therefore all employers may incur a penalty for each tax month in which one or more RTI PAYE reports for a scheme are late.

Contractors who file late between 6th March – 5th April can expect to receive a penalty notice in late May 2015.  Penalties can be between £100 – £400 per month depending on the number of employees in the scheme. There is a right of appeal which can be made online or in writing, both of which will be considered in exactly the same way. HMRC will however be able to process an appeal more quickly if made electronically. Appeals can only be made once a penalty notice has been issued, and cannot be made by telephone.

Avoiding unnecessary penalties

Although it’s a bit of a bind, hopefully most freelancers are already filing on a timely basis given that, in most cases, there is only one employees’ details to report. To ensure that you don’t fall foul of the taxman here are a few tips:

1. Report PAYE on time by sending a Full Payment Submission (FPS) on or before the earliest payment date that is reported on it. Remember in particular that all reports for 2014-15 tax month 12 must be returned by the same deadlines as for rest of the year. The filing deadline of 19th May following the end of the tax year no longer applies
2. If you are sending your submission after any of the payment dates reported on it make sure you use the late reporting reason code if appropriate. For example, if an FPS needs to be resubmitted because of an IT difficulty, check whether any of the reported payments no longer meet the ‘on or before’ obligation and, if so, consider claiming ‘reasonable excuse’ in the associated Late Reporting Reason field. You might need also need to use the late reporting reason code even if you have reported everything on time, but the FPS is sent after the payment date, for example because you are making a correction, or are a small or micro employer who is taking advantage of the easement to report monthly. Further information on ‘Late reporting reason’ can be here
3. Send an Employer Payment Summary (EPS) by 19th of the month if:
   – you don’t pay anyone during the tax month.
   – you are going to have a period of inactivity and won’t be reporting for several months even if you have submitted a final FPS earlier in the year.
4. If you use a payroll services provider or an agent to run your payroll, get your payroll information to them in good time to meet the reporting deadlines
5. Tell HMRC if there are any changes to your business or your payroll practices which mean that HMRC will not receive the reports they would otherwise have been expecting, for instance:
   – you change the number of payrolls or how often you pay your employees, for example  changing from weekly to monthly;
   – the PAYE scheme has now ceased and you are no longer paying anyone.

Further late filing penalties

Where an FPS is outstanding for 3 months or more HMRC may charge a further penalty of 5% of the tax and NIC that would have been paid if the information it provides had been sent on time. This penalty however will only be applied for the most serious and persistent failures.