HM Revenue and Customs (HMRC) has delayed its automatic in-year PAYE penalties for late filing and payments, stating that it would hold off its 6 April deadline for employers who had not yet fully embraced the new Real Time Information (RTI) system.
The RTI system has been dogged with difficulties since it launched; last year users reported that the new system had classified tens of thousands of workers as no longer in employment, disregarding their taxable benefits and resulting in them being "undertaxed".
HMRC tested its systems and in October claimed that its IT system was not the reason for discrepancies in calculating charges, but that this was instead due to a transition to RTI reporting for employers and payroll service providers.
Thereafter, it said that the majority of firms were RTI-compliant, but it has now said that "RTI is a big change and HMRC and some employers are continuing to learn".
HMRC has therefore decided to stagger the start of the new penalties to give employers more time to adapt. It will still penalise companies in April for in-year interest on any in-year payments not made by the due date. In October, companies will be fined for in-year late filing, and in April 2015, organisations will automatically receive penalties for late payments.
HMRC said that it was also updating its systems and guidance, partly by working closely with the Department for Work and Pensions (DWP) to ensure that the RTI system will be able to integrate with Universal Credit – another government IT system that has been plagued with issues.
HMRC's director general for personal tax, Ruth Owen, said that the introduction of RTI is going "extremely well" for the majority of employers but that others were struggling.
"There are still some [employers] who need a bit of time to adapt fully to the changes," she said. "This additional time will give us the opportunity to ensure that improvements to our internal systems are working, to learn from them and to provide better customer support to employers who need more time to adapt."
In December, HMRC was warned that its RTI system lacks comprehensive disaster recovery, which could put the Universal Credit welfare programme at risk.