RTI penalties: good news for the future but…

This week HMRC announced a fourth relaxation in the RTI penalty regime. Let’s recap on the history…

  • February 2014:
    • the introduction of late and non-filing penalties delayed until October 2014
  • August 2014:
    • a phased introduction of late and non-filing penalties for PAYE schemes. Those with 50+ payees beginning in October 2014 and all other schemes beginning in March 2015
    • automated late payment penalties to be introduced in April 2015
  • 17 February 2015:
    • Late payment penalties to be risk-assessed, not automated, from April 2015 and a 3-day easement introduced to the ‘on or before’ rules for filing introduced retrospectively to October 2014 to reduce the number of penalties that would be incurred. Penalties that had already been sent for the period October – December 2014 could be appealed
  • 17 June 2015:
    • automated late and non-filing penalties scrapped for 2015/16 and moved to risk assessed (the same as late payment)

This week’s announcement is at pains to point out that schemes that file late ie outside the 3-day easement, are non-compliant and risk a penalty.

The announcement came in the middle of the quarter 4/month 12 penalties being received by agents and employers. I have seen a number of these over the last two weeks and would make the following observations:

  • A significant number have not been preceded by a GNS warning message as should be the case
  • The first default in the period October 2014 – March 2015 for a scheme with 50+ payees should be unpenalised. Any penalty notice where the first default has a penalty shown is wrong and should be appealed. Some do correctly show a zero as the first default, but this is not consistent
  • Only schemes with less than 50 payees are penalised for the first default which cannot be before tax month 12 ie 6th March to 5th April
  • There is no requirement to pay the penalty if you intend to appeal even though the notice says you must!

The Penalty and Appeals Service (PAS) can be accessed by employers through their PAYE Online Id and by agents through their portal. HMRC confirmed in the Employer Bulletin published on 18 June 2015 that where the 3 day easement is the basis for the appeal then ‘Reason code A’ must be selected for the appeal with ‘Return filed within 3 days’. This is a change of policy to the original instruction about these appeals that asked for the ‘other’ reason to be selected and the same text to be inserted in the freeform text box.

It now appears that any appeal where ‘other’ is selected causes the appeal to be referred for clerical investigation. This will be an issue for HMRC as they do not have the resource to consider these appeals just as they cannot handle SA appeals, as all resources are now focused on tax credit renewals. So wherever possible use the specific appeal codes for your reasonable excuse as this appears to lead to an automatic penalty cancelation. You should look for the GNS message that will arrive within a couple of days and the postal cancelation of penalty notice that will follow.

If your referred appeal is subsequently refused you can still request an internal review of the decision and HMRC should tell you this but appears to be omitting to do so.