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HMRC moves away from automatic penalties

Posted: June 19, 2015

HM Revenue & Customs has said it will move from automatic tax penalties to a less rigid approach.

Rather than issue late filing penalties automatically when a deadline is missed, HM Revenue and Customs (HMRC) said will take a more “proportionate approach” and concentrate on the more serious defaults on a risk-assessed basis.

“This approach will enable HMRC to concentrate more resources on the more serious failures to comply, and to focus on educating employers about their filing obligations through targeted communications, webinars and Employer Bulletin articles,” HMRC stated.

This approach is in line with the likely direction of HMRC’s general approach to penalties, outlined in the HMRC penalties: a discussion document which it issued earlier this year and in HMRC’s fresh approach to considering appeals against late filing penalties for Self Assessment.

Late reporting penalties already apply to employers with 50 or more employees, so this ‘risk-based’ approach will apply to submissions that were late from:
•    6 March 2015 for employers with fewer than 50 employees, and
•    6 January 2015 for employers with 50 or more employees.

HMRC will continue to issue risk-based penalties for the tax year 2015 to 2016 tax year. It says it does not want to charge penalties, but wants employers to report on time. It wants to help employers who are trying to do the right thing, rather than penalise them.

This move to issuing risk-based late filing penalties also continues HMRC’s strategy of adapting its approach, where necessary, before moving to the next phase of implementation.

It applies in addition to HMRC’s recent announcement that it will not be penalising minor delays of up to three days. HMRC will monitor both, and review by April 2016.

Even if employers do not get a penalty, they are required by law to file on time and if they do not may be charged a penalty on a future occasion. The deadlines for sending PAYE information stay the same, including the requirement to send PAYE information on or before the time that employees are actually paid or due to be paid.