HMRC have introduced changes within the PAYE system that will affect all employers within the next year.
RTI is the biggest change in the PAYE system for 70 years.
Employers need to ensure they are prepared to be compliant from April 2013.
RTI is being introduced to simplify the operation of the PAYE system for both HMRC and employers and in addition the information obtained will support the work of the DWP when universal credits are introduced. HMRC expect records and information to be more accurate and make administration more efficient. The system is integrated with the payroll process and this is also expected to improve the issue of in year coding notices for employees. Using RTI employers will be notifying HMRC about tax, NI and other deductions when or before payments are made rather than after the end of the tax year. There will therefore no longer be a need for P35 or P14 forms. Employees starting and leaving processes are also expected to be easier.
Each time an employee is paid the information will be submitted to HMRC online via a full payment submission (FPS) which details all the deductions due. The existing HMRC gateway will accept this online information. It is therefore evident that employers will need to use a software package that is capable of meeting these new rules. Employers will need to contact their software providers and ensure the software can cope with these changes.
The new scheme has already being piloted – since April 2012. HMRC will send employers and pension providers guidance and notes of the new scheme in October 2012.
Invites (although there is no choice!) will be sent in January and February 2013 advising employers the date by which they must have commenced operation of the RTI scheme. In the majority of cases this is expected to be April 2013. It will be mandatory for all employers to be using the RTI service by October 2013.
Preparation for this scheme is paramount and is something employers should be thinking about now – there is even the option of joining the pilot scheme and therefore registering early.
The first FPS submitted will need to include all employees who have been employed during the current tax year. Including starters, leavers and also any employees who have not received a payment during the period.
HMRC require the following information in respect of each employee;
- Hours worked – this will be an important piece of data as this will be used by DWP, and options will be less than 16 hours, less than 30 hours, more than 30 hours.
- Passport number – not mandatory but required if a new starter does not have a national insurance number
- Details of payments to employees earning below the lower earnings limit, so they have a complete picture!
- Details of casual and seasonal employees and any employees on leave and not been paid for 3 months or more
It is vital that the data transferred is accurate to ensure the alignment with HMRC records is correct, otherwise submissions will fail.
Employers should therefore start to check their records now in respect of;
- Full name – this must be correct, and not the use of short names or initials
- Date of birth – some payroll systems just use a default date so this is an important check
- National insurance number
Employers need to check their payroll processes to ensure that they will be able to comply with the RTI requirements. They also need to ensure they have allowed time for training for updated software.
The new RTI will also have an effect on how payments are submitted to BACS. Certain software may need to be updated so that HMRC can track payments and ensure they agree with the FPS.
All employers are required to use RTI, e.g. if a small employer has individuals earning below the lower earnings limit that currently do not have a reporting requirement to HMRC, but 1 person has earnings above the limit then all employees details are required to be notified on the first FPS.
You should ensure that you are aware of these mandatory requirements for RTI transmission and look out for your required commencement date.
Contact Leighton Reed to discuss any areas that we can assist you in preparing for RTI.
If you’re a Sage customer and looking to get to grips with RTI, then Sage are running courses to assist you – details on our Sage Solutions page.
Tags: compliance, Real Time Information, RTI