PAYE was first introduced over 70 years ago and the move to Real Time Information (RTI) is the biggest change to reporting taxpayer information to HMRC since it was started. The latest changes have been implemented to provide up-to-date information to HMRC instead of filing returns at the end of the financial year. It is hoped that RTI will reduce the administrative burden on business that is associated with PAYE.
HMRC have introduced RTI to improve the supply of information. In simple terms, RTI means that when an employee is paid the PAYE information is communicated directly to HMRC at that time. Employers will communicate earnings, deductions (tax, national insurance contributions etc.), new starter and leaver information during the year. This information was previously supplied in end of year reports.
The new rules will affect employers from 6 April 2013. Some employers, accountants and payroll bureaus volunteered to join early and are already submitting data to HMRC regularly.
RTI has been introduced this year due to the Universal Credits tax system that will be implemented in August 2013. The Universal Credits system requires up to date information on an individual’s earnings so that it can accurately calculate awards to claimants.
How will this affect you?
Most employers operating PAYE will need to ensure they are operating RTI from April 2013. All employers will need to be reporting in real time by October 2013. If your business currently operates its own PAYE then you will need to use some form of software to regularly report data to HMRC. Details of software providers can be obtained from www.hmrc.gov.uk. Many accounting packages and payroll software will have this embedded into the software but you may need to download or purchase an upgrade.
If you did not know RTI was coming, you do now. It is essential for real-time reporting that the information you transfer is correct. So what should you do to prepare your business for RTI?
- Check your employee data. Make sure your employee’s names, dates of birth and national insurance numbers are correct.
- Check you are registered with HMRC for PAYE Online. If you already operate PAYE then it is most likely that you are registered already. If you use a payroll service then they will have you registered.
- Contact your payroll service provider. If like many businesses you outsource your PAYE then contact your service provider to check they have the correct information.
Changes you will see
The way PAYE is calculated is not changing. It is simply the reporting that will change. As data is transferred in real time many forms including P35, P14, P45 and P46 will no longer be sent to HMRC. The end of year P60 will still be issued and P11d’s will still be used to report employee’s expenses and benefits. Employers will still issue P45’s to leavers but a copy is not sent to HMRC.
Real Time Information is just around the corner and your business needs to be ready. We normally recommend that small businesses outsource PAYE to a payroll bureau. The administrative burden of processing PAYE in-house is often not worth the few pounds it costs paying a service provider to do it for you. More information on RTI can be found at www.hmrc.gov.uk. This information is provided as a guide only. If you are not sure what your business needs to do to be compliant for RTI we recommend you seek advice from your accountant.