RTI catching out some North West employers

Real Time Information (RTI) is catching out many employers in the UK, who this month are being hit with penalties by HMRC, and a leading payroll expert is urging businesses to get their act together, or be liable to substantial fines.

Lisa Kennery, payroll manager of Blackburn based business advisory and accountancy group, Pierce, and a regular blogger on payroll and pensions matters, suggests anecdotal evidence indicates that many employers are unaware of, or simply not taking seriously, their new responsibilities for weekly or monthly reporting of PAYE, despite the first batch of stiff penalties for non-compliance being issued to UK companies by HMRC this month.

She is calling for all businesses in the region with fewer than 50 employees not to be caught out, either by ignorance or defiance of the new regulations and claims that HMRC means business when punishing offenders.

“It has been law since April 2013 for employers to adopt RTI for reporting of PAYE and those with more than 50 employees, who have failed to comply, are this month being hit with the first round of penalty notices, which build month by month and accrue interest if infringement of regulations continues.

"Real Time Information requires employers paying wages monthly or weekly to submit a return to HMRC on, or the day before they pay employees. This is different to the old system that required employers to submit returns annually and, as a consequence, it’s caught out many employers. And, from 6th March this year, employers with fewer than 50 employees will also run the risk of penalties for late or inaccurate returns.

“Employers outsourcing payroll should be fine but those managing payroll in-house are perhaps at most risk if they haven’t sought advice and invested in the specialist software required to enable businesses to make the returns on-line to HMRC. It’s a sea change in how PAYE is reported to HMRC but it appears that the message hasn’t got through to everyone.”

HMRC penalties for late filing of Full Payment Submissions are based on the number of employees at a business and begin at £100 monthly, rising to £400, plus, if over three months late, an additional 5% of the value of the PAYE an employer should have reported.

Kennery believes that smaller businesses could not sustain regular penalty payments for long before cash flow would be affected adversely. She adds: “It’s my opinion that few small or medium size businesses can afford monthly fines, with interest, even if the UK economy is on the way back to good health, because it would be detrimental to working capital. It therefore doesn’t make sense for employers to be lax about RTI, whether they believe it is increasing their administration burden or not.

Despite the gloom, some better news coming from HMRC is that the “seven questions” checklist, designed to replace the old P35, will be removed from 6 March 2015. From this date, HMRC will accept a final Full Payment Submission or Employer Payment Summary for 2014-15 and 2015-16, with or without a completed checklist, although employers should still report the Final Submission for Year indicator. HMRC guidance also recognises that some software developers may not be able to make the necessary amendments to their end of year products in time for the final 2014-15 submissions. HMRC guidance states: “In cases where employers do have to complete the checklist in order to make their final submission, they should ensure that they complete it accurately. We will remove these checklist items from our Basic PAYE Tools as soon as possible but this will probably not be until July 2015.”