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RTI penalties made clear by HMRC

If you take responsibility for payroll, either in-house or outsourced, it’s essential that you keep your finger firmly on the pulse of the changes that happen as this new RTI regime unfolds.

One such change is the original plan for imposing penalties across the board for all offenses automatically. Thankfully HMRC have had a bit of a re-think on this point and announced earlier in 2014 that they will be somewhat more tolerant than originally expected, but this truly isn’t an excuse to sit back and ignore your RTI responsibilities.

Why? Because those penalties will come and they will be automatic and costly.

So, if you’re teetering on the edge of compliance as far as RTI is concerned, here’s an overview of a few things you need to be aware of:

1. From April 2014, you will be facing in-year interest penalties on any in-year payment that you’ve failed to make by the due date.
2. From October 2014, if your filing of returns isn’t up to date or becomes late, you’ll be landed with an automatic late filing penalty.
3. Come April 2015 if you make a late payment you’ll be hit with an automatic penalty.

What you should be doing right now

In the ideal world, you need to be making sure that your RTI system is completely up to date and is in good working order. By doing this, you’ll be able to forget all about penalties, because you’ll be filing your returns and making your payments on time. However, if your system isn’t working properly or you’re unsure of your obligations, you could inadvertently find yourself in the situation of facing some pretty substantial penalties. Needless to say, if you’ve chosen to ignore your RTI obligations completely, you can almost certainly expect some hefty penalties in the not too distant future.

What you should do before midnight on 5 October 2014

Because late filing penalties will start to take effect from this moment, you need to make sure that any returns that are late are filed. While you still run the risk of a risk-based penalty until this time, it’s sure that if you haven’t got your returns up to date by 6 October, you’ll be hit with an automatic penalty. These are the penalties that will be applied:

1-9 employees – £100 penalty
10-49 employees – £200 penalty
50-249 employees – £300 penalty
250+ employees – £400 penalty

What you should do before April 2015

Once April 2015 is on the horizon, if you have outstanding payments, you should make a point of getting them up to date. By doing so, unless your case is deemed by HMRC to be high risk, you should avoid a penalty. Although HMRC have said that they’ll turn a blind eye to small outstanding sums (of up to £100), the penalties that they will apply thereafter are as follows and it’s worth noting that these are in addition to penalties of 5% that will be applied automatically after a delay of 6 months:

1-3 defaults per year – 1% penalty
4-6 defaults per year – 2% penalty
7-9 defaults per year – 3% penalty
10+ defaults per year – 4% penalty

From April 2014, the percentage penalty will apply to the full amount that is late in the tax month (except for the first late payment of the tax year).

What is more, interest penalties will be applied from tax years 2014/15 onwards. These interest penalties will be charged on a daily basis and will have an interest rate of 3% pa imposed, so the message is clear…if your head is in the sand with regard to RTI, now’s the time to wake up and smell the coffee if in order to avoid costly penalties.