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What is Real Time Information (RTI)?

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  • 1. What is Real Time Information (RTI)?● most significant change to Pay As You Earn (PAYE) since itsintroduction just after WW II● from April 2013 employers will receive an invitation to join RTI●will advise the date upon which the employer needs to submit anEmployer Alignment Submission (EAS) or their first Full PaymentSubmission (FPS), to HM Revenue & Customs (HMRC).●EAS will normally be required only where the PAYE scheme has250 or more employees There is no change to the way in which tax or national insurance is calculated – this is simply a change to the reporting requirements
  • 2. So what is the current reporting procedure?● employer runs a payroll and produces employee payslips● employer makes payment to the employees● on or before 19th of each month the employer pays tax and NI (concession if deductions are under £1,500)● on or before 19th May each year the employer submits tax yearend P14s and P35 returns So until receipt of the P14s and P35 HMRC has no way ofvalidating that the employer has made correct payments of tax and national insurance during the tax year
  • 3. New RTI procedure●FPS is to be submitted every time anyone is paid (monthly,weekly, ad-hoc)●first FPS must include year to date details for all employees paidduring tax year including leavers● even where an employer has sent an EAS first FPS must stillinclude all employees● P14 and P35 not required for the year an employer joins RTI●FPS data submitted about each employee will be used tocalculate how much an employer must pay to HMRC for each taxmonth HMRC no longer need to wait until the end of the tax year to discover whether or not the employer has paid over the correct amount of tax and national insurance
  • 4. Starters & Leavers● form P46 no longer required for new starters without a P45●however requirement to ask all new employees a series of starterquestions, similar to those on the form P46 including the same P46statements A, B and C, and student loan question establish thecorrect tax code and make student loan deductions●in other words, employers will need a new starterquestionnaire not to dissimilar to the current P46 – seewww.hmrc.gov.uk/forms/starterchecklist.pdf●no longer a need to submit a P45 (part 3) or P46 to HMRC asnew starter details will be included in the FPS●similarly leaver details will be included on the FPS instead ofsubmitting a form P45 to HMRC however, employers will still berequired to give departing employees a form P45
  • 5. Who should be included in the FPS?●P38A supplementary return not required as employers will includeall payments in FPS●i.e. under RTI employers will have to tell HMRC aboutpayments of earnings to all employees, even where anemployee earns less than the Lower Earning Limit●under 16s do not need to be included in an FPS unless theirearnings exceed the income tax personal allowance – see alsohttp://www.hmrc.gov.uk/employers/p31-from-e13.pdf●you should deduct PAYE tax regardless of an employees ageonce their earnings exceed their personal allowance
  • 6. On or Before●employers will be required to submit a FPS on or beforepayment is made to employees●could be problematic, particularly for employers who do notconform to the regular weekly, fortnightly, or monthly payroll routine● exceptions where reporting on or before will cause difficulties ina small number of cases, or for notional payments – seewww.hmrc.gov.uk/rti/on-or-before.pdf● will include payments which meet all of the following conditions: ✔ made to employees for work done on the day of payment ✔ made non-electronically (e.g. cash or cheque) ✔ made at a time or place where it would be impractical for it to be reported ‘on or before’ the time of payment ✔ where the employer cannot know how much the payment will be in time to report the information in advance of the payment being made
  • 7. The Employer Payment Summary (EPS)●where there have been no payments to any employees in a taxmonth EPS showing No payment due as no employees orsubcontractors paid in this pay period● within 14 days following the end of the tax month i.e. 19 th ofmonth●for non-submission HMRC will specify an amount due for thatmonth, and pursue payment of same●where the employer has claimed an advance of statutorypayments
  • 8. EPS will include ...● No Payment for Period indicator and dates from and to● period of inactivity from and to i.e. notifying a future period ofinactivity● value of advance received from HMRC year to date (previouslyincluded in P35)●value of SSP, SMP, OSPP, SAP, ASPP, and NIC Compensationon SMP, OSPP, SAP, ASPP year to date● CIS deductions suffered year to date● value withheld under NIC Holiday scheme
  • 9. So what will not change using RTI?● the way tax and national insurance are calculated● payment dates to HMRC● providing employees with P60s at tax year end● preparing a P11 deductions working sheet●reporting a change to HMRC e.g. updating employees name oraddresses for HMRC records● HMRC Data Provisioning Service (DPS) and EDI outboundmessage services (employers will still be able to choose how theyreceive coding notices)● filing monthly returns due under CIS arrangements
  • 10. FPS will comprise ...header date including:● HMRC Office Number● Employer PAYE Reference● Accounts Office Reference Number● Tax Year● Self Assessment Unique Taxpayer Reference (UTR) or companytax reference
  • 11. for each employee:● national insurance number● title, surname or family name, forename or given name● initials, second forename or given name● date of birth● current gender● address and UK postcode and foreign country if not UK● payroll number● irregular employment pattern indicator
  • 12. ● pay frequency e.g. w1 weekly or m1 calendar monthly● payment date, tax week number, tax month number● number of earnings periods covered by payment● aggregated earnings indicator●number of normal hours worked i.e. “A” – up to 15.99 hours, “B” -16 to 29.99 hours, “C” - 30 hours or more, “D” - other● tax code, week 1 / month 1 indicator● BACS hash code● on strike indicator● unpaid absence indicator
  • 13. ● taxable pay in this period● tax deducted or refunded● student loan deduction● pay after statutory deductions● benefits taxed via payroll●employee pension contributions paid under a net payarrangement●employee pension contributions not paid under a net payarrangement● deductions from net pay● non tax or national insurance payments
  • 14. ● year to date values for above, plus● statutory sick pay● statutory maternity pay● ordinary statutory paternity pay● statutory adoption pay●additional statutory paternity pay, and if there is any additionalstatutory paternity pay …● the partners national insurance number● partners surname or family name● partners forename or given name● and partners second forename or given name
  • 15. ● national insurance category letter● scheme contracted-out number (SCON)● directors national insurance calculation method● week of directors appointment● gross earnings for national insurance this period and year to date● employee contributions payable this period and year to date● employers contributions payable this pay period and year to date● earnings year to date within each NI band
  • 16. additional for new starters:● start date● starter declaration statement (“A”, “B”, or “C”)● student loan indicator● passport number● residency information about living in UK or overseas● European Economic Area citizen indicator● EPM6 (Modified) scheme indicator
  • 17. additional for leavers:● date of leaving● and payment after leaving indicator
  • 18. additional for last FPS in the tax year:● final submission for year indicator● employers contracted-out number (ECON)●and responses to the familiar P35 questions such as “did youmade free of tax payments to any employees?”●and some new ones such as “is this the last report for this PAYEscheme because it is closing?”
  • 19. In due course the HMRC system will be aligned with that of the benefits agency so that a closer control over benefits payments can be achieved by ensuring that benefits go to those with appropriate qualifying earnings.
  • 20. RTI & BACS● employers who make payment via the bankers automatedclearing system (BACS) under their own Service User Number(SUN) will need to include additional information in the BACSpayment file● four character entry in Field 7 (currently spare) consisting of aninitial / to identify it as an RTI payment, and three randomcharacters (which will be generated by the payroll software)● RTI submission to HMRC will also include a cross-reference (orhash) calculated using this Field 7 reference, plus other data fromthe payment file● when BACS process the payment, they will use it and otherinformation in the payment file to re-create the cross-referencesent to HMRC
  • 21. HMRC will then match the cross-reference sent from BACS with the information sent by the employer, so it will be possible to match individual payments into employee bankaccounts with the payslip value reported under RTI, and more importantly, investigate those which do not.