The next 15 months will see fundamental changes to the way employers report PAYE information to HMRC. In brief, employers will be required to submit complete and reconciled data to HMRC every pay run rather than the present system of reporting once a year.
Real Time Information (RTI), the name given to this new way of reporting PAYE, will for the first time provide HMRC with a detailed overview of your payroll information during the tax year. All employers will be required to operate their payroll using RTI from October 2013 with plans to mandate employers to begin using RTI, dependent upon the size of their payroll, between April and September 2013.
Why the Change?
HMRC has embraced the use of IT in recent years and encouraged, and subsequently compelled, employers to submit payroll related data electronically using appropriate payroll software or the HMRC website. This includes information on employees starting or leaving employment and the Annual Employer PAYE Return (P35) at the end of the tax year.
It is only after receipt of the P35 that HMRC has access to your complete payroll activities. This process can lead to enquiries in respect of the amount of tax or national insurance deducted from individual employees pay and discrepancies in the value of funds allocated to settle PAYE liabilities incurred during the tax year. HMRC is also seeking to reduce its administrative burden with the introduction of this automated system.
Why October 2013?
October 2013 will see the introduction of Universal Credits. RTI will enable HMRC to share up to date information with the Department of Work and Pensions needed to operate this new system which is based on household income.
Where are we now?
A pilot programme for RTI involving 310 volunteer employers commenced in April 2012 and more are scheduled to join later this year. HMRC are confident that their systems will handle the significant increase in the exchange of data in October 2013 that will follow the full scale introduction of RTI. Experience tells us that life does not always run smoothly.
How can I prepare for RTI?
Act now. You should carry out a review of your payroll records and the process you undertake when employing new staff. Under RTI you will be required to record complete details of your staff including their full name (surname and forenames), date of birth and National Insurance Number. In addition you will need to identify the number of hours each member of staff would normally be expected to work and apply this to one of four bands devised by HMRC.
The next step
All PAYE schemes will undergo an Employer Alignment’ Submission (EAS) to identify any missing information before using RTI. Once RTI is in place any shortfall in data will be treated as incorrect and risk rejection of your pay run files to HMRC. The current penalty system for when delays in the submission of information and payment of PAYE occur will remain in place. Rejection of RTI data may well result in financial penalties.
We can help
The introduction of RTI will result in administrative challenges, not least in the way you manage and operate your payroll. Hazlewoods operate with the latest payroll software and are a registered Bacs bureau. We recognise that change provides challenges and would be happy to discuss your payroll requirements as our qualified and experienced team are here to remove the anxiety that payroll can bring.