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The penalties regime of the forthcoming real-time information (RTI) system should be deferred and universal credit plans be revamped, the taxman has been told.
The Chartered Institute of Taxation (CIOT) called on HMRC to suspend fines for late-filing of in-year submissions during the first 12 months of the new PAYE requirement, which was launched as a pilot in April and will affect all employers from October 2013.
The professional body recommended that the penalty model, when instigated, acknowledge an employer’s compliance history: the first default should attract no reprimand, while a second default would result in an automatic suspended fine. Only a third default within a specified period would trigger a punishment.
Penalties should be based upon the number of employers for whom information is filed late, not on the total employee pool, which would unfairly penalise large employers, insisted the CIOT.
The institute also asked the Revenue to consider changing plans for the new universal credit to allow monthly reporting of payments under RTI, rather than require businesses to send information to the taxman ‘on or before’ every payment made to an employee.
The arrangement as it stands will pose a considerable hurdle to full compliance for many employers, especially small businesses, claimed the CIOT in response to the consultation document Securing Compliance with Real Time Information – Late Filing and Late Payment Penalties.
The body’s Colin Ben-Nathan said, “Monthly reporting necessitates a vital change to universal credit plans, which have failed to take into account the very employers who provide the information for the credit.
“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 on helping employers move to the new system,” added Ben-Nathanm, who chairs the CIOT’s employment taxes committee.
The Revenue responded to the institute’s concerns by claiming its use of penalties “has never been about raising revenue”.
“They are designed to encourage compliance, and to reassure the majority who file and pay on time that HMRC take non-compliance seriously,” said a spokesperson.
“We understand the concerns that some employers have raised about reporting payroll information. We are working with employers and other representatives... to find the best way to address the issues.”
