HMRC gives small businesses five-month extension for RTI

Previously, the government had said all businesses must introduce RTI in their payroll systems by 6 October 2014.

HM Revenue and Customs (HMRC) confirmed that although companies with 50 or more employees must meet the October deadline or face fines, smaller firms will have a reprieve until 6 March 2015.

RTI requires employers to send details on payments and deductions, including tax and National Insurance, to the tax body as they are made, instead of in an annual return.

Ruth Owen, director-general for personal tax, said RTI is ‘working well’ with 95 percent of PAYE schemes making returns in real time.

According to HMRC figures, seven out of 10 businesses that have already met the regulations said it is easy to do so.

The government’s previous experience of rolling out RTI has found ‘it’s best to introduce changes in stages’, in order to allow systems and guidance to be updated, Ms Owen said.

‘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,’ she added.

Penalties for RTI failures were due to begin in April 2014. However, in February HMRC announced a staggered penalty approach, with no fines levied until October 2014.

The payroll changes come as small and medium-sized enterprises (SME) grapple with auto-enrolment legislation.

All businesses will be required to enrol workers into a pension scheme automatically by February 2018.

Payroll providers have previously been criticsed for not helping companies with auto-enrolment as they grappled with RTI changes.