Real Time Information explained
We take a look at what the new PAYE reporting rules mean for small businesses and how employers can prepare
From April this year, most employers will need to report their employees’ gross pay, tax, National Insurance contributions and other deductions when or before salaries are paid, instead of waiting until after the end of the tax year. The new PAYE reporting rules – known as Real Time Information (RTI) – will apply to all employers by October 2013 and penalties will be introduced from April 2014 for non-compliance.
What do I need to do to be RTI compliant?
In the run-up to the introduction of RTI, there are a number of things employers should be doing in readiness:
- Check all your employee information is accurate including name, address, date of birth, gender and NI number
- Have a record of the hours that each employee regularly works in a week
- Include all staff, even those under the Lower Earnings Threshold (LET)
- Include all starters and leavers during the tax year you join RTI
- Ensure your payroll software is RTI-compliant
- Send a Full Payment Submission (FPS) to HM Revenue & Customs (HMRC) – they will contact you to tell you when they need it.
Why do I need to make changes for RTI?
A single Universal Credit is going to replace most Tax Credits and HMRC needs accurate information on pay and deductions to facilitate its introduction.
What happens if I don’t comply with the new RTI guidelines?
Penalties can already be charged for missing payments and late year end returns but from April 2014 additional penalties will be introduced for non-compliance with RTI.
What other payroll changes will there be?
- If you pay your staff by BACS, additional information will need to be included in the BACS reference
- When you take on a new employee, forms P45 or P46 should no longer be sent to HMRC – details need to be entered into the payroll software to be automatically reported to HMRC through electronic submissions
- When an employee leaves, they will still receive a P45, but again it does not need to be sent to HMRC – details need to be entered into the payroll software as for starters
- If you suffer any Construction Industry Scheme (CIS) deductions, these will now be reported via RTI
What is not changing under RTI?
- PAYE itself will not change- it is merely the reporting that is changing
- The process of making payments to HMRC and the options available will remain unchanged
- Employers will still be required to issue their employees with P60s
- P11Ds will remain outside of RTI and therefore should be completed in the normal way
- HMRC are not at presently prescriptive about the method used to pay employees. Under RTI, HMRC will not look to mandate how employees are paid. So you can continue to use whichever method you wish to pay employees
- If you are deducting CIS from your subcontractors, these will be reported on form CIS300 as normal and will remain outside of RTI for now
Breaking news for small employers
HMRC announced on 19th March 2013, that until 5th October 2013, employers with fewer than 50 employees will be allowed to send information to HMRC by the date of their regular payroll run – but no later than the end of the tax month (5th). HMRC have not released much detail to accompany the concession, but there are two things which should be brought to readers’ attention:
- HMRC state small employers “may” make use of this concession, which implies that the concession is an option; rather than the default. So small employers could still opt to report on a real-time basis
- HMRC also state the concession applies to “payments that are made to employees weekly or more frequently and the payroll is only processed monthly”. This implies that where a small employer currently pays their staff say weekly and runs the payroll weekly, they will not be able to make use of the concession
Nonetheless, the temporary measure will be of great use to a number of small employers and is a victory for the number of bodies that collectively wrote to Exchequer Secretary to the Treasury, David Gauke, to outline their concerns about small businesses facing the new RTI reporting system. HMRC has also confirmed it will continue to work with employer representatives throughout the summer to measure the impact of RTI on the smallest firms. But HMRC will be mindful not to compromise the overall benefits of RTI or impede the imminent introduction of Universal Credit- which is due to replace most Tax Credits later this year. TaxAssist Accountants is the UK’s largest network providing tax and accountancy advice and services specifically for small businesses.