Was a late filing penalty correct where return was submitted early?

It may seem bizarre to think of a late filing penalty being issued when a real-time information return is filed early, but that is exactly what happened to one employer. Naturally, they appealed against the penalty – so what did the tax tribunal have to say on the matter?

Employers must adhere to strict deadlines for submitting payroll information under real-time information (RTI) reporting. Among these is the requirement to complete a full payment submission (FPS) for each pay period. HMRC’s guidance and the legislation state that this must be submitted “on or before making a relevant payment”, i.e. before the pay date in question. There is some leniency, and if the submission of the FPS is within three days of the payment date, the penalty can be waived. However, it appears that the “on or before” mantra is incorrect, as one company found out. Quayviews Limited (Q) decided to batch file several returns early in order to avoid late filing penalties. In September 2020, it submitted returns for payroll months 7, 8, 9 and 12 together. HMRC issued late filing penalties, despite its own software recording the returns as successfully submitted. It transpires that HMRC’s platform does not allocate the FPS to a specific month, and instead records it for the tax month it is received. No filing of an FPS made in a tax month will trigger a late filing penalty. Q appealed to the First-tier Tribunal on the basis that it had a reasonable excuse, given the wording of HMRC’s guidance and the legislation. The tribunal judge agreed, and cancelled the penalty.

The case is a reminder that HMRC’s guidance is not absolute, and you should avoid submitting FPS returns in periods they don’t relate to.

This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.