HMRC needs to clarify the Real Time Information issues for insolvent businesses as a matter of urgency, Baker Tilly says
In his weekly briefing, George Bull, the firm’s head of tax, says that the department does not seem to have got to grips with the difficulties involving RTI and insolvency appointments – despite repeated attempts by R3, the trade body for insolvency practitioners, to get answers.
Bull points out that, in the case of insolvencies, the submission of payroll information under RTI might be delayed due to insufficient or badly kept records or the withdrawal of external payroll service providers.
Alternatively, the employer might have already run a payroll and made an RTI submission to HMRC, but is then unable to actually pay the employees due to the insolvency. In normal trading situations, the employer is able to rectify errors in the next return, but where the business ceases to trade, there will be no further payrolls run. Or the employer pays the wages but does not submit the return.
Another issue arises over dividends. Where the employer’s payroll system is to be maintained or a system needs to be put in place for the purposes of paying a dividend, it would add to the cost of the insolvency proceedings.
Failure to comply with the RTI provisions will lead to fines being levied on the business. But, as Bull suggests, levying fines in insolvency proceedings seems unreasonable as this would reduce the funds available to creditors.
He also thinks that HMRC’s intention that all relevant payments will eventually have to be made through BACS will prove “disproportionately costly when paying dividends because of the time involved in ascertaining and setting up beneficiary details”. Also, he adds, former employees may fail to respond to requests for bank details.
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