By Brian Palmer, AAT Tax Policy Adviser and Owner, Palmer & Co
Reporting in Real Time (RTI) has been in effect for the majority of UK business owners for well over a year now. While the system has worked well for most of these businesses, there also has been a fair share of criticism.
There is a view that RTI is still undergoing issues. According to a recent article there are 5.5 million people that have either overpaid or underpaid taxes in 2013-2014 an increase of 300,000 people from the previous year. If this is true, it is not necessarily a positive outcome for a system that’s cost £357 million to implement.
Here I am going to discuss some of the most common perils and pitfalls experienced by small business owners and some simple tips on how to avoid and rectify them.
The common issues
As is always the case most of the mistakes that have occurred are easily avoidable, the following are some of the most common and, at least in some cases, easily avoidable issues.
· Where an employer has deducted statutory payments from the amounts due they must record this fact on their Employers Payment Summary (EPS) otherwise HMRC will think that they underpaid the PAYE due to them.
· Seasonal employers need to remember that in months when they have not engaged any employees, or if they have made no payments to existing employees they need to file an EPS indicating a nil payment period. Apart from leaving them exposed to the risk of receiving a penalty. HMRC may calculate the amount due based on the history of previous payments.
· Because of software design limitations some employers unable to create a second submission in any one period.
· No, or late submission. A big no-no which of course leads to a fixed penalty for a default and which applies once there is a second default. HMRC will also penalise you for late payment.
Top tips to avoid falling into any of these pitfalls
· Make sure all employee payroll-information is kept as up to date as possible. Inconsistencies between HMRC and your actual records can result in the wrong tax codes being used which leads to discrepancies in the tax that is then paid.
· Ensure all EPSs are filled out completely and sent in before the normal due date for payment of PAYE.
· Ask your software provider if their system allows you to make more than one submission per period. (Mistakes can and do happen).
· Dedicate a specific time in your diary to get into the routine of completing your payroll on time each week / month. Train a member of staff to assist as part of a contingency plan that allows for annual leave, training days or sickness.