RTI reporting challenging for micro-employers

A lack of understanding of how the PAYE real time reporting (RTI) process works is continuing to drive errors in reporting among micro employers, according to research by HMRC.

Failures in PAYE RTI reporting management are the main source of micro-employer error. HMRC research found that PAYE management was not integrated into the payroll process and that many respondents did not see it as a ‘coherent, end-to-end process’.

RTI aims to improve the process of employers submitting their PAYE information about their employees to HMRC.

Key findings:

  • Good practice among employers existed when RTI reporting duties were integrated into the payroll process
  • Dates and deadlines presented the biggest single challenge for micro employers
  • Lack of checks and low prioritisation lead to micro-employers misunderstanding RTI reporting and contributing errors in submissions.

Employers surveyed were known to have received a PAYE late filing penalty and those who had made an amendment after the end of the tax year by submitting an Earlier Year Update (EYU).

The report states that among HMRC’s main considerations is the introduction of more clarity and consistency on penalties, saying:

“The penalty system is an existing communication channel and could be used to raise awareness of the causes of penalties by including more detailed information in the penalty notice letter itself, or signposting to a diagnostic tool to help micro-employers to identify the cause of error.”

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