RTI Proposed Penalties

As HMRC's flagship RTI continues to prepare for its maiden voyage, Economia has provided some detail about the penalties that HMRC will impose on those hapless companies that do not comply with RTI's requirements.

RTI penalties will be issued automatically (don't we love automatic penalties?) to employers and will be subject to appeal in line with other penalties. However, not every penalty will be automated.

In addition to late filing and late payment penalties, there will also be manual penalties for filing an incorrect return under RTI.

HMRC have stated that everything should be “as simple as possible” in order to encourage compliance. As such penalties should:

• Be fair;
• Influence behaviour; and
• Be effective.

A consultation document issued earlier this year received a meagre 40 responses. Despite this HMRC has not ruled out any of the suggestions, and are considering how these would fit with the wider regulations regarding penalties.

HMRC do warn that that repeated errors will feed in to HMRC’s risk assessment, and that these errors may trigger further investigations and penalties. 

Anyhoo, whilst HMRC ponders what to do, the original proposed penalty regime consisted of a basic and an enhanced version (both of which stand until HMRC refine them one way or another).

As per Economia the basic model suggested the following:

• Immediate penalty charged at the time of default with a penalty charged for each default;
• Further penalties for outstanding returns charged at the 6 and 12 month points;
• Additional penalties if no information is received by HMRC at the 6 and 12 month points.

The enhanced model based the penalties on size of employer rather than defaults and also included the following adjustments:

• A warning rather than a penalty at first default;
• Penalties to be issued quarterly rather than immediately;
• Employers to be allocated to staggered quarters;
• Penalties levied only when they reach £500.

Again additional penalties at the 6 and 12 month points would apply.

HMRC do not intend to change the existing model for late payment penalties. However, they did set out the following amendments which they believe are in keeping with the stated aim of keeping the penalty regime as simple as possible:

• Change in the definition of the trigger date for late payment penalties to the day after the due date;
• Ensure that penalties will be charged for all late payments relating to the tax year and not just payments due during a tax year;
• Fixing the penalty level to the number of defaults during the tax year;
• Amending the regulations so that “excessive” penalties can be reduced;
• Automatic charging of penalties on a monthly or quarterly basis.

I believe, according to the Twitterverse anyway, that there are now less than 100 working days until RTI goes live.

Full steam ahead!

Tax does have to be taxing.

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