Three months into the compulsory requirement of reporting PAYE information in real time, HMRC have announced the temporary relaxation of RTI reporting rules for small businesses will be extended from October 2013 until April 2014.

The extended relaxation period has meant that these businesses are still required to report through the new system, but are able to do so once a month, rather than each time they pay their employees. This gives small businesses (with fewer than 50 employees) that pay weekly, but who only run their payroll at the end of the month, some extra time to adjust to the new requirements.

HMRC have stated they are continuing to work with businesses to identify whether there are any unusual circumstances it needs to cater for in the longer term. But all employers need to plan to be reporting in real time from April 2014.

HMRC’s Director General for Personal Tax, Ruth Owen, said:

The roll-out continues to exceed our expectations. I am delighted that 83% of SMEs and 77% of the smallest businesses are already on board. We will now write to the minority of employers who are not, to establish how we can help them meet the requirements of reporting in real time.

Penalties

An employer will be allowed one penalty-free late return each tax year.  After this a penalty will be charged based on the number of employees in the PAYE scheme.  However, Employers will only suffer a maximum of one penalty per month regardless of the number of returns due in that month.  A penalty of 5% will be applied if the return remains outstanding after three months.
The frequency of late payment penalties being issued will also be amended from 2014/15 onwards.  From 6 April 2014 late payment penalties will be automated and will be charged throughout the year rather than at the end of the tax year.

Getting ready

The RTI penalty changes do not come into effect until April 2014, giving employers just under a year to get up to speed with RTI and to make sure they have procedures in place for filing accurate returns on time and for making payments on time.
However this is not a penalty-free period – existing penalties continue to apply!