Some SMEs in the UK will start incurring fines for submitting late Real Time Information (RTI) tax returns from next month, after the HMRC announced phase-in dates.

While firms with 50 employees or more that submit late RTI returns will face fees from October 6th onwards, small businesses with 49 employees or less will now be exempt from receiving penalties until March 6th 2015.

Since the automated PAYE RTI system was established last year, businesses have had to supply tax returns on or before the date their employees are paid, as opposed to the past model where firms only had to submit this information at the end of the financial year.

Bearing in mind the massive impact this would have on smaller companies, the HMRC provided an adjustment period exempting SMEs from being fined.

However, the roll-out dates for bringing in these late filing fees have now been confirmed and it’s hoped the added delay for the smallest companies will provide the time needed for them to fully adapt the system.

Is the RTI tax system working effectively for small businesses?

The Chartered Institute of Taxation (CIOT) believes this delay in rolling out the fines has proved to be a positive step, yet the overall system still needs improving.

Colin Ben-Nathan, Chairman of the CIOT Employment Taxes sub-committee, said: “Smaller employers, in particular, need a longer period of time to adjust to PAYE and other administrative changes because they have very limited resources which are primarily geared to servicing their clients and customers.

“So it is encouraging to see that the government has recognised this point in the present circumstances.”

Despite citing the benefits of the delay, Mr Ben-Nathan believes a lot of work must be done to ensure the accuracy of automated generic notification messages to employers.

He added: “An improvement in the accuracy of the late filing, non-filing and late payment messages would not only reduce the volume of penalties issued in error by HMRC, but would also reduce the number of appeals that inevitably result from this.

“Additionally, we consider that HMRC also needs to do more to make speedier use of the RTI data it is receiving to improve the accuracy of PAYE deductions for employees and pensioners.”