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All employers operating Pay As You Earn (PAYE) are required¹ to make returns under real time information (RTI) (see E4.1104) to provide HMRC with pay and deduction details each time they pay their employees.

With effect from 2014/15, a separate penalty regime applies to RTI returns which are not made on time². This also applies to returns in connection with the apprenticeship levy from 6 April 2017.

Penalties apply to each PAYE scheme, with the size of the penalty based on the number of employees in the scheme, so that different-sized penalties apply to micro, small, medium and large employers. Filing defaults apply for each month that a return is not received. The first default in any year is not penalised, but all subsequent defaults attract a penalty.

Penalties are charged quarterly, and are subject to the reasonable excuse and appeal provisions (see A4.568, A4.596). An additional tax-geared penalty applies where a return is outstanding for three months or more.