Employers are warned about a new reporting system for PAYE, which could prove to be a burden for the unprepared. PAULETTE THOMAS explains the reasons for the new system and advises how you can get ready for the change.
Real Time Information (RTI) is a new compulsory reporting system which changes when employers must submit information to HM Revenue and Customs. Under RTI, rather than reporting details of tax, National Insurance contributions and other deductions at the end of the relevant tax year, employers will be required to report information when or before the payments are made to employees.
The new system will be introduced next year, with employers required to start using RTI from April 2013. All employers will be brought within the system no later than October 2013.
RTI will enable HMRC to verify, during the tax year, that the correct deductions are being made from an employee’s pay and that the correct monthly or quarterly PAYE remittances are being paid over by the employer. Currently HMRC has to wait for the submission of Form P35 (Employers End of Year Return) until it is able to review these matters, however Form P35 will be withdrawn once RTI is introduced. The requirement to issue employees with Form P60 will remain.
Another major motive behind RTI is the introduction of Universal Credit, the streamlined benefits system, in October 2013.The Universal Credit system requires HMRC to supply the Department of Work and Pensions with up to date information about a claimant’s employment income, eliminating the need for the claimant to have to supply the information themselves. RTI will enable HMRC to do this more easily.
Under RTI, reporting will become an integral part of an employer’s normal system when they process their payroll. The required information will need to be sent online through the Government Gateway, or, in the case of larger employers, using the Electronic Data Interchange. HMRC intends that eventually RTI data will be submitted through the BACS system and that it will be cross referenced with the BACS payments actually made to employees.
It is understood that HMRC are working with payroll software developers to ensure that their products are updated to be able to deal with the new RTI requirements. Small employers (with nine or less employees), can use the free HMRC ‘Basic PAYE Tools’ package to submit payroll data to HMRC.
Employers should be aware that the earlier availability of information to HMRC under the new system is likely to result in an increase in interest charges and the number of penalties being issued in relation to the late payment of PAYE.
So, what do you need to do to prepare for RTI?
One major issue of RTI is the amount of additional information which has to be reported to HMRC in relation to employees. This includes: passport number, hours worked, frequency of payments made, details relating to any employees who are paid irregularly, amount of any payments made to an employee which have not been subject to PAYE and various details relating to the partner of an employee who has been paid Additional Statutory Paternity Pay.
It is important to be aware of this additional information required and to get systems in place to gather it. If you process your payroll in-house, speak with your payroll software provider to ensure they will have software updates ready in time, to enable you to comply with your obligations under RTI.
If you have any queries regarding RTI, please contact a member of the Tax Team at your local Champion office, or a member of our Payroll Team on 0161 703 2500