2014/2015 Real Time Information (RTI) Penalties

Late returns for 2014-15 onwards

New late filing penalties will apply to returns due from employers for the tax year 2014-15 onwards. Having listened to customer feedback, HMRC is deferring the start of these penalties to give HMRC and employers more time to adapt to reporting in real time. They will now start from 6 October 2014. To avoid late filing penalties, you must make sure all submissions due are fully up to date by 5 October 2014.

Where payment information is not received as expected on an FPS, or you haven’t told HMRC that no employees have been paid in a tax period by sending an EPS, late filing penalties will apply. These rules apply to each PAYE scheme, rather than each employer. So, if you operate more than one PAYE scheme you need to make sure that the FPS for each individual PAYE scheme reference is submitted on time or, where there were no payments made to any employees for a particular scheme for a tax period, you told HMRC by sending an EPS.

New, automated in-year late payment penalties will start from April 2015. In the meantime, HMRC will continue to charge late payment penalties – on a risk-assessed basis – on payments due from employers for the tax year 2014-15 onwards.

Penalty charges for late returns and how they will apply

In addition to where submissions do not appear to have been filed by the due date, a late filing penalty for a month may be issued where one of the following applies:

  • payment information is not received as expected on an FPS
  • you haven’t told HMRC that no employees have been paid by sending an EPS

However, no penalty will arise for the first month in each tax year where there is a filing default. This means there are a maximum number of 11 fixed penalties per tax year that can be charged for filing failures.

New employers will not be issued with a penalty if their first FPS is received within 30 days of making their first payment to an employee. But after that, normal penalties rules will apply if an FPS is filed late.

The size of the late filing penalties depends on the number of employees within the PAYE scheme.

Number of employees Amount of the monthly filing penalty per PAYE scheme
1 to 9 £100
10 to 49 £200
50 to 249 £300
250 or more £400

HMRC will use the latest information available to determine the number of employees, and the size of the filing penalty for each period where a return is late.

When the penalty notice will be issued

Ordinarily, HMRC will send employers a filing penalty notice quarterly in July, October, January and April, where appropriate. These penalty notices show the amount of the filing penalty for each tax month identified in that quarter. For example, a penalty notice in July will show any filing penalties arising in the first quarter of the tax year – that is, month 1 (6 Apr to 5 May), month 2 (6 May to 5 June) and month 3 (6 June to 5 July).

The penalty notice will advise you of the amount you’re being penalised, tell you how you can pay it and what to do if you don’t agree a penalty is due.

Additional penalties for returns over three months late

Where a return is late for three months or more and the information that it would have contained has not been provided on a later return, a further penalty may be charged. This additional penalty is set at 5% of the tax/NICs that should have been shown on the late return. This will be used for the most serious and persistent failures.

Paying penalties

All penalties are due for payment 30 days following the date of the penalty notice. Penalties not paid on time will attract interest.

Penalty rates and how they will apply

Penalties are charged on each PAYE reference number (also called a ‘PAYE scheme’). Therefore, if you operate more than one PAYE scheme you need to make sure that amounts due for each individual PAYE scheme reference are paid in full and on time.

The total penalty charged can be made up of a number of items:

  • a default penalty, for failure to pay monthly/quarterly payments on time and in full
  • penalties for amounts still unpaid after 6 and 12 months

There are also additional penalties for amounts charged annually or occasionally.

The rest of this section explains how the penalties apply for different types of payment.

Monthly or quarterly PAYE payments

You will not be charged a penalty if only one PAYE amount is late in a tax year – unless that payment is over 6 months late.

The amount of the penalty will depend on how much is late and how many times your payments are late in a tax year. The table below shows how the penalties are calculated.

For tax years 2014-15 onwards no penalties will apply where there is a small difference in the amounts paid over each tax period compared to the amounts reported as due on your Full Payment Submissions (FPS) and any EPS – where appropriate – for the same period. However, daily interest will continue to accrue on all unpaid amounts from the due and payable date to the date of payment.

Penalty charges for late monthly and quarterly PAYE payments

Note: The first failure to pay on time does not count as a default.

Number of defaults in a tax year Penalty percentage Amount to which penalty percentages apply
1 – 3 1% From April 2014: the total amount that is late in the relevant tax month (ignoring the first late payment in the tax year)
4 – 6 2% From April 2014: the total amount that is late in the relevant tax month (ignoring the first late payment in the tax year)
7 – 9 3% From April 2014: the total amount that is late in the relevant tax month (ignoring the first late payment in the tax year)
10 or more 4% From April 2014: the total amount that is late in the relevant tax month (ignoring the first late payment in the tax year)

Example: ABC Ltd paid four payments late in the tax year 2013-14. The first late payment is not counted as a default therefore they have three defaults in total, which means that a penalty of 1% is due on the total amount of PAYE paid late (excluding the first late payment).

For tax years 2014-15 onwards, if ABC Ltd paid months 2-6 late, the first late payment (month 2) is not counted as a default. The employer has one default in the first quarter (month 3) and three in the second quarter (months 4-6). This means that a penalty of 1% will be charged on the amount paid late for month 3 at the end of the first quarter (July). At the end of the second quarter (October) a penalty of 1% of the month 4 and 5 amounts, and 2% of the month 6 amount of PAYE paid late, will be charged.

Additional penalties for monthly and quarterly payments over six months late

If you have still not paid a monthly or quarterly amount in full, after six months you will have to pay a penalty of 5% of the amounts unpaid. A further penalty of 5% will be charged if you have not paid after 12 months. These penalties may be charged in addition to the penalties for monthly and quarterly payments described in the previous section and apply even where only one payment in the tax year is late.

End of year adjustments

You will be charged a late payment penalty if you pay less than is actually due. This applies even where you pay roughly the right amount each month or quarter and then make an end-of-year adjustment. You should therefore make sure you pay on time and in full each month or quarter, rather than estimate the amounts you need to pay.

However if you pay an adjustment after the end of the year under a special arrangement such as applying the ‘Intermediaries’ rules (these are often referred to as IR35) or a formal modified PAYE arrangement known as ‘Employment Procedures Appendix 6′, HMRC will not charge late payment penalties, providing you keep to the terms of the arrangement.

To avoid receiving a penalty you must make certain that you pay the right amount on time each month or quarter.

Amounts due annually or occasionally

You may have to pay a penalty of 5% of the amount that is late if you have not paid the full amount by the date known as the ‘penalty date’. There’s more information about the different ‘penalty dates’ later in this section of the guide.

You may have to pay an additional 5% penalty if you have still not paid the full amount within 6 months of the due date and a further 5% penalty if you have still not paid the full amount within 12 months of the due date.

Penalty dates

The penalty date varies according to the type of payment.

For payments such as Class 1A and Class 1B NICs, HMRC determinations and assessments and amendments or corrections to returns the ‘penalty date’ is 30 days after the due date. This means that for these payments you may have to pay:

  • a 5% penalty if you have not paid the full amount within 30 days of the due date
  • an additional 5% penalty if you have not paid the full amount within 6 months of the due date
  • a further 5% penalty if you have not paid the full amount within 12 months of the due date

In most other cases, the penalty date is the day after the due date.

There’s a link to the HMRC Compliance Handbook in ‘Technical Guidance’ at the end of this guide for more detail on annual or occasional penalties.

Paying penalties

From April 2014, all penalties are due for payment 30 days following the date of the penalty notice. Penalties not paid on time will attract interest.