With the introduction of a new automatic PAYE penalty system being introduced in October 2014 it is it time to consider the cost of the penalty system to British business? You decide. 49% of the 17,200 automatic VAT late filing penalties issued by HMRC in 2013 were overturned on re review. In 2011/12 HMRC cancelled penalties in 60% of cases.
The above findings are for 2013, from recent research from accountants Hacker Young and for 2011/12, from lawyers Pinsent Masons.
The time it takes to lodge an appeal varies from case to case but most of businesses who try DIY appeals will find that they will need several hours if not a day in the most basic cases. There is wait for delays in corresponding with HMRC, then the need to state your case and make an appeal in strict time limits whilst also requesting a review by HMRC, and if that does not work, a formal appeal is lodeged and time is taken to gather evidence.
HMRC is due to introduce a new automatic penalty system for Real Time Information (RTI) reporting under PAYE in October 2014. This will apply when RTI returns are not submitted on or before payment. If automatic penalties are as "successful" for RTI as they are for VAT and don't include an automatic appeal mechanism many businesses will find themselves spending more time appealing penalties than creating new business.
An accountant writing on the Accountingweb members forum recently questioned whether it is worth running payroll services in the light of the proposed new penalty regime:
"I'm beginning to think that we don't actually need the hassle and threat of penalties that running payrolls for clients brings. We gave it a try, but in reality, which British Company would be expected to enter into a contract where the penalty clauses outweighed the contract value? We run the risk of at least a £100 penalty per client per month when we actually charge the client far less than that. I'll say it again, as an ex businessman, RTI is the biggest threat to businesses in this country.....until Auto Enrolment comes along."
Autoentrolment for pensions...another story.
