The latest quarterly bulletin from The Pensions Regulator makes interesting reading and highlights what excuses for non-compliance will be reasonable..
Penalties on the up – but not in proportion to numbers of employers staging Between July and September this year, we’ve had to use our powers more often, as increasing numbers of small and micro employers reach their staging date and leave it to the last minute to prepare. Although the number of Compliance Notices has risen to over 26,000, we find the majority of employers subsequently comply when given this ‘nudge’ to remind them of their duties.
Our use of Escalating Penalty Notices has also increased – however, this is a very small proportion relative to the number of Compliance Notices, or to the number of employers staging. Less than 5% of Compliance Notices progress to an Escalating Penalty Notice, which demonstrates that our approach of educating and enabling before enforcing is both effective and proportionate.
When is a reasonable excuse not a reasonable excuse? This period, we issued 3,728 Fixed Penalty Notices to employers for failing to meet their automatic enrolment duties. After asking us to review our decision, a number of them contested their fines at a tribunal, claiming that their non-compliance was unintentional and that they had a ‘reasonable excuse’.
The circumstances that employers are citing in their defence include confusion between the employer and the payroll administrator as to who is supposed to be doing what, illness, and being short-staffed. However, as the case studies illustrate, in the eyes of the law, these reasons are not sufficient to avoid a fine.
‘Our approach of educating and enabling is effective and proportionate’
Automatic enrolment Compliance and enforcement Quarterly bulletin 1 July – 30 September 2016...
Preventing non-compliance
‘A reasonable excuse for HMRC’s purposes may not be enough to avoid an automatic enrolment fine’
The idea of a reasonable excuse is also used by HM Revenue & Customs (HMRC) for appeals against tax penalties, but the tribunal has made it clear that the two regimes are separate. The same basic principle applies, in that a reasonable excuse is something unexpected or outside your control that stopped you meeting your statutory duties. But because the automatic enrolment and tax duties are different, something that amounts to a reasonable excuse for HMRC’s purposes may not be enough to avoid an automatic enrolment fine.
For example, HMRC guidance says that a problem with their online service is a reasonable excuse for failing to file a tax return on time. However, the tribunal has rejected it as an excuse for failing to complete a declaration of compliance, because we offer an alternative telephone service, and also because of the number of reminders that we give employers to complete their declaration in good time.
The following do not amount to a reasonable excuse, whether for a failure to file a tax return or a failure to complete the declaration of compliance:
- you relied on someone else and they let you down
- you found the online system too difficult to use
- you didn’t get a reminder
- you made a mistake
- you or a member of staff were ill.
Comment: If you are soon due to set up a compliant auto-enrolment pension by the Staging Date (you should know that date after being informed by letter by The Pensions Regulator) then you should ensure you comply — to avoid the hassle of leaving it until the last minute and also because your employees expect you to do the right thing — you will also avoid any non-compliance measures that are clearly now being used by The Pensions Regulator.
HOT NEWS!We are about to partner with a Pension company as a service benefit for our clients/ potential clients — a company that I think ably competes with, and in fact betters in many respects, the well known NEST pension scheme. Please contact me for further details if you are struggling in anyway to get organised with your auto-enrolment pension obligations for a no-obligation discussion regarding how we or the Pensions company may be able to help you.
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