The CIPP lobbies HMRC to delay RTI penalty regime

23 January 2014

The CIPP has taken the opportunity to lobby HMRC to delay the RTI penalty regime which is due to come into force from April 2014.

The CIPP has responded to the draft Statutory Instruments making amendments to the Income Tax (Pay As You Earn) Regulations 2003 (the 2003 Regulations) and The Social Security (Contributions) Regulations 2001 (the SSCR 2001). These draft regulations are in respect of the easement s afforded to micro businesses to report monthly rather than “on or before”. In addition the CIPP has used this as an opportunity to lobby HMRC to delay the RTI penalty regime. The CIPP conducted a survey with its members and the wider payroll community via the CIPP website and LinkedIn. The policy team would like to thank all those who responded to the survey. In summary, views were as follows:

Easement for micro employers

Whilst the CIPP would prefer all employers to be on a level playing field in respect of legislation, it does agree, that RTI is an additional burden on business, especially for the small and micro businesses. The CIPP therefore supports the easement until April 2016 for those who currently employee 9 employees or less. Allowing these employers more time to submit returns on or before pay day and utilising the monthly option, will help to address their burdens. It should however be noted that in the responses to the penalty regime survey (below), a number of respondents said they would have preferred the reporting option to be on a monthly basis; this was also offered as a preferred choice by the CIPP during the RTI consultation period. The CIPP supports this easement not being available for newly set up employers after April 2014.

RTI penalty regime

  • 41% (65) stated they were responding in an employer capacity and 59% (93) stated they were responding in a payroll service/software provider capacity. There were two who added they responded in both capacities.
  • 32.5% stated their main business was in the accountancy industry; however with the exception of publishing all other sectors listed were represented with views.
  • 160 respondents answered the question regarding the number of employees/pensioners paid. Whilst only 16.25% (26) responded as having less than 50 employees, the CIPP is pleased that the very small and micro employers shared their views. Those who pay between 1001 and 5000 employees submitted the most responses at 33.13% (53).
  • Only two questions were asked; the first “do you have confidence in HMRC issuing accurate penalty notices in respect of the employer obligations for real time information from April 2014?” Of the 148 people who responded to this question an overwhelming majority (108 or 72%) said they didn’t have confidence in HMRC issuing accurate penalty notices. 35 respondents were unsure, and 5 respondents said they did have confidence. Responses from those who have confidence in the system did so from the range of employees paid below 5000 with only one confidence vote from a payroll service/software provider. The survey asked those who said no to give their reasons some of which summarised below.
    • HMRC Dashboard is not showing the correct employer accounting information
    • Ineffective administration from HMRC including their ability to respond to queries promptly
    • HMRC v the agent v the client i.e. HMRC contacting employers who use an agent declaring their agent hasn’t submitted an FPS when this isn’t true causing unnecessary reputational damage for the agent community
    • Major failings by HMRC in their ability to address letters properly
    • Incorrect Generic Notices
    • Perception from employers/agents based on HMRC’s previous performance with new systems
    • Reconciliation issues from Debt Management and Banking.

The second question asked was “do you think the penalty regime should be delayed?” And by how long. The question did not rely on the answers around confidence. Of the 149 people who answered this question the majority (nearly 60% or 89 respondents) said the penalty regime should be delayed by 12 months. Nearly 19% felt it should be delayed for 24 months and 10% stating it should be delayed by 6 months. Just 4 people said it shouldn’t be delayed, 3 of whom were employers and one payroll service/software provider.

One comment received as to why they didn’t think the penalty regime should be delayed was

“Many companies are still not complying; carrot has not worked, so time to switch to stick".

Those who believe the penalty regime should be delayed offered a variety of reasons. Below is a summary of the key reasons given to delay the penalty regime.

  • A lack of confidence in HMRC systems; not robust enough or accurate
  • Delaying will provide HMRC more time to sort out the reconciliation issues
  • Will provide payroll software providers more time to iron out any issues with RTI
  • Will allow employers more time to understand the payroll process changes without fear of financial penalties.

Recommendations made:

  • HMRC should delay the RTI penalty regime for at least 12 months to allow RTI reporting to settle down and HMRC systems to be enhanced to meet employer needs. Delaying will also, the CIPP believes help to restore confidence in HMRC’s reconciliation routines
  • Improve the Dashboard updating; real time would be preferred
  • Allow employers to quote the tax month on any Employment Payment Summary to try and minimise incorrect postings by HMRC’s Debt Management and Banking department.

To read the full response including all the survey responses please follow the link below.

CIPP response to regulation amendments for RTI - January 2014