Small employers could face RTI penalties

Small organisations and those that employ casual staff could suffer under real-time information (RTI) reporting, particularly from the on-or-before payment requirement.

It requires the employer to submit information to HM Revenue and Customs (HMRC) each time they pay an employee. For example, when a catering company that uses casual staff to wait tables at an evening event pays staff then and there, they will also have to make a RTI submission that night.

Smaller employers, especially those that employ only one person, such as a nanny or a carer, may not have the payroll infrastructure to cope with the reporting required by RTI regulations.

Under current proposals, there are likely to be penalties for the late filing of submissions.

Lesley Fidler, associate tax director at Baker Tilly, said: “There are some employers that will have to make submissions on every single day of the month, whereas others will only be doing one a month. It does seem a bit unfair to have these kind of anomalies.

“Penalties have not yet been set, but are currently being consulted on. There is a feeling that there should be a one-year run-in to see what the issues are and try to get information on why some employers aren’t complying.”

Fidler added that the requirement to submit information electronically could cause further problems for small employers in areas where broadband coverage is limited.

The Chartered Institute of Taxation (CIOT) has urged the government to consider changes to the RTI programme to ensure employers aren’t penalised unnecessarily in its first year of operation.

The CIOT has recommended a deferral of penalties in the first year that RTI is in operation, as well as a change to monthly submissions to HMRC, as opposed to the on-or-before payment is made to the employee.

The recommendations from CIOT were included in its response to the HMRC consultation paper, Securing compliance with real-time information – late filing and late payment penalties, which closed on 6 September.

RTI is intended to make it easier for employers, providers and HM Revenue and Customs (HMRC) to administer the pay-as-you-earn (PAYE) system. Most employers will be using the programme by April 2013 and all employers will be using it be October 2013.