Real Time Information is a new system for submitting payroll information to HMRC. It comes into force in April 2013 for SME’s; by October for larger companies. It’s a big change and is generating a lot of fear and uncertainty, but employers should not panic.
The Pay As You Earn (PAYE) system has changed very little since it was introduced in 1944. In spite of its quirks, PAYE was designed to make it relatively easy for employers to recruit and pay new staff. However, with little more required than a name, tax code, bank details and National Insurance category, HMRC’s records are hopelessly incomplete and inaccurate. RTI is being introduced to improve and streamline the operation of PAYE.
Why is HMRC introducing RTI?
- to simplify the PAYE process for both HMRC and employers
- to enable a more efficient response to PAYE errors
- to simplify the employee starting and leaving process
- to support the introduction of Universal Credits
- to reduce fraud
- to provide the Department for Work and Pensions with up-to-date and accurate information
Under the current system, employers submit PAYE information to HMRC at the payroll year end. The new system will require employers to submit payroll data to HMRC on or before every pay day. In addition, employers will have to accurately record more information about employees and their pay than they presently do. It is advisable to introduce new procedures now, in order to cope with the level of change being implemented.
Although employers will still be required to provide P60s and complete P11D and P11D(a) forms for taxable benefits and expenses, they will no longer be required to submit P14, P35 and P38A returns for casual employees.
Failure to comply with the new regime will result in a substantial penalty from HMRC.
- If you outsource your payroll, speak to your provider and ask what you must do;
- If you do your own payroll, check if you can accommodate RTI in your existing procedures; if not, install RTI-enabled software;
- Make sure all your employee information is correct and up-to-date;
- Register for PAYE Online;
- Check what information will have to be provided;
- Regularly visit the HMRC website for news and updates.