HMRC axes automatic fines for late PAYE filers

A decision by the taxman to no longer issue late-filing penalties automatically when smaller employers have missed the deadline for submitting PAYE details is being welcomed.

The Association of Taxation Technicians (ATT) praised the “positive” move by HM Revenue & Customs, which has confirmed a “more proportionate approach” to in-year PAYE penalty issuing.

In particular, while late-reporting fines already apply to employers with 50 or more staff, HMRC’s new “risk-based” approach will apply to two batches of late submissions.

Penalties will no longer be automatic on submissions that were late from 6th March 2015 for employers with fewer than 50 staff, and 6th January 2015 for employers with 50 or more staff.

Reflecting on the announcement, the ATT said it was partly due to HMRC “finding it difficult to cope with a system that issues hundreds of thousands of fixed penalties”. It added:

“[But] taxpayers don’t pay them and therefore resources have to be put into chasing very small amounts, or when they appeal them citing ‘reasonable excuse’ and HMRC have to then follow this up, again using valuable resources”.

The Revenue prefers that its change of tack owes to it wanting employers to both report on time and help them to “do the right thing, rather than penalise them.” It also said:

“This approach will enable HMRC to concentrate more resources on the more serious failures to comply… in addition [we]…will not be penalising minor delays of up to three days.”

The ATT's Natalie Miller welcomed what she said was “pragmatism” from HMRC following its penalty review, which resulted in late self-assessors being let-off automatic £100 fines.

However she says it will be important that employers who are ‘first-time late-filers’ soon receive word from the Revenue about why they are being offered a period of grace from penalties.

Miller added: “If HMRC do not explain their approach then there is the concern that some of these employers may end up becoming ‘serial late filers’ because they will see the penalty system as an ‘empty threat’.”

Perhaps aware of such an issue, HMRC said it would monitor the effects of not automatically fining late PAYE filers or self-assessors with a reasonable excuse, and review by April 2016.