UK Small businesses struggling to get to grips with Real Time Information (RTI) have been granted some breathing space as penalties for late RTI PAYE returns have been pushed back until 6th March 2015 for small employers.

RTI represents the biggest change to the payroll system in over 60 years. It requires employers and pension providers to report deductions and payments they make to HM Revenue and Customs (HMRC) at the time they are made, rather than after the end of the tax year. It is hoped this will enable the tax system to better ensure the right tax is being taken at source.

The UK government had said previously all businesses must introduce RTI in their payroll systems by 6th October 2014 but companies with fewer than 50 employees have been given an extra five months to comply with regulations.

HMRC Director-General for Personal Tax, said: “We know from our experience of rolling out of RTI that to ensure a smooth transition for our customers it’s best to introduce changes in stages. This will allow us to update our systems and enhance our guidance and customer support as needed.

“We know that those who have had most difficulty adjusting to real-time reporting have been small businesses, so this staged approach means they have a little more time to comply with the new arrangements before facing a penalty.

“We believe this is the best approach for HMRC and our customers, as we all get used to the new in-year penalties.”
However, larger businesses – those with over 50 employees – will face penalties from October 2014.
HMRC have said that they will send electronic messages to all employers to let them know when the penalties will apply to them, based on the number of employees shown in the department’s records.
Where employers believe they have a reasonable excuse for sending a return late, they will be able to appeal using HMRC’s new, online appeals process for automated penalties. This should speed up the appeal process for businesses and HMRC.

In the run up to March 2015, HMRC will examine other ways to encourage employers to comply with the rules, in addition to financial penalties.