Contractors no longer exempt from RTI as of March
Pay as you earn, or PAYE schemes, which have 49 employees or fewer will need to start filing their Real Time Information, or RTI, reports on time or face potential penalties. The 6th of March sees the introduction of the new rules which could mean that significantly fewer contractors are exempted, meaning that they will need to complete the reporting process in good time in order to avoid being fined.
However, there is plenty of good news in that HMRC have recognised that this is placing an additional administrative burden on contractors, and they have announced that there will be a three day grace period which will act as a reprieve for those who file their PAYE information within a short time of the deadline. They are keen to point out that the filing deadline has not changed, and that employers will still have to lodge their Full Payment Submission, or FPS, on or before each deadline unless they are subject to conditions as set out in the department’s guidelines for exemptions.
Next month, in an attempt to reduce the number of unnecessary penalties likely to be issued, HMRC will be closing around 1,500 PAYE schemes which have failed to make a PAYE report since April 2013, on the assumption that they are no longer operating. There will be letters sent to those who are affected to warn them of the closure and also to offer advice to any which are still, or should still be, in the system. Employers who filed within three days of the last deadline, which was the 5th January 2015 for the period October 2014 to January 2015, can appeal any penalties they have incurred by notifying the department using their online system.
While many contractors are welcoming the news that the three day penalty-free period has been instated, there are cynics who have suggested that there might be an ulterior motive to this act of apparent generosity on HMRC’s part. They believe that there are data issues within the department, and they feel that it is a desire to remain unscrutinised that has encouraged this recent concession to popular pressure.
Those who are expecting to submit their return late, but within three days of the deadline, can still use any relevant lateness code if special circumstances apply such as unforeseen problems like IT failure or an instance of sudden illness.
The late payment penalty system will remain under review by HMRC in order to ensure that they are using a process of risk assessment rather than automatically applied fines. A review of any changes made to the penalty system is due by April.
If you want to ensure that you have all your finances in order and that you are complying with all relevant contractor tax legislation, then our handy contractors’ guides are an excellent source of information and advice. You can learn more about working through your own limited company or anything else about contracting. For more information please call our team of experts on 01442 275789 or email firstname.lastname@example.org.