HMRC told to go penalty-free for RTI debut

Tax experts are urging the government to defer any penalty regime for the Real Time Information programme, which will apply to all contractors, so small companies can get used to the “onerous obligations” it will impose.

The Chartered Institute of Taxation said that requiring businesses to send information to the taxman ‘on or before’ payments are made to the employee(s) - or be fined, meant non-compliance might become “a way of life,” particularly for the smallest firms.

Instead, HM Revenue & Customs should agree to a penalty-free period of 12 months, meaning no late-filing fees would hit employers who make in-year submissions during RTI’s first year in operation (October 2013 to October 2014).

This would also allow employers to make monthly payments – but a change to the universal credit plans would be needed, rather than the ‘on or before’ requirement for employee payments, which is proposed for each and every time a payment is made.

“This is a new responsibility and burden being placed on employers,” the institute reflected. “The penalty regime must be proportionate… [because] ‘on or before’ reporting will be extremely difficult”.

Employers who make payments at the end of a shift based on the hours just worked or amount produced stand to be the hardest hit, while those with expatriate employees and share schemes will probably find the requirement “impossible to meet consistently.”

Moreover, businesses are used to complying with their tax and reporting obligations on a monthly basis or payroll, not sending information to HMRC at the time of payments being made, or in advance.

“We are calling for the proposals to be changed to permit monthly reporting,” said Colin Ben-Nathan, chair of Employment Taxes committee at CIOT.

 “This change would enable RTI to be introduced far more smoothly with less impact on many employers. It would reduce the effort needed to police compliance and enable HMRC to concentrate more on helping employers move over to the new system.”

HMRC said it welcomed comments on its proposals, but a spokesman implied that penalties for both late payment and filing would still apply under RTI.

“Our use of penalties has never been about raising revenue. They are designed to encourage compliance, and to reassure the majority who do file and pay on time that HMRC takes non-compliance seriously," the spokesman said.

“We understand the concerns that some employers have raised about reporting payroll information 'on or before' the time of payment. We are working with employers and other representatives, including our Customer User Group, to find the best way to address these issues.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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