ACTIVE PRACTICE UPDATES NOVEMBER 2012Real Time Information– are you ready?Real Time Information (RTI) is a new system being introduced inApril 2013 by HM Revenue & Customs (HMRC) for the reportingof payroll information, which will effectively require employers andpension providers to provide detailed information to HMRC every Business UPDATEtime employees are paid rather than through the year end return.Under RTI, the employer will be requiredto submit information; including details of the beneit payments to be calculated and adjusted for claimants based on their Main changesearnings and the tax and NIC deducted earnings each month, rather than the Undoubtedly RTI will have an impactwhenever a payment is made to an current system which often leads to errors on the way information is collated andemployee. With the implementation of RTI and abuse. It is estimated that the new communicated with HMRC. The mainbecoming mandatory without exception Universal Credit system will reduce fraud changes and challenges are:between April 2013 and October 2013, and error by £2 billion over ive years. • Firstly, all employee data sent toRTI will be the biggest single overhaul to Many commentators believe that this movethe payroll since PAYE was irst introduced is long overdue, whilst sceptics suggest HMRC must pass a validationin 1944. A pilot of the RTI scheme began this will increase the administrative burden check against the HMRC database.in April 2012 allowing HMRC to test the placed on employers and further push the Referred to as the Employersystem and resolve any problems prior to UK towards a ‘Big Brother’ state. Alignment Submission (EAS) or athe mandatory implementation date. irst Full Payment Submission (FPS), HMRC increases its this will be the irst step to joiningRTI will link with the monitoring RTI and will allow HMRC to updateUniversal Credit their database with the details from this submission. Employers will be Not to be fooled, RTI will also make theOne of the main reasons that the RTI monitoring of PAYE much easier for HMRC contacted to notify them when andsystem is being introduced so promptly as the information will be up to date how this should be completed. Thisis as a result of the pending introduction and accurate. This will allow HMRC to submission will need to includeof the Universal Credit beneit system more promptly identify and pursue those starters and leavers in the year, notfrom October 2013, which is intended businesses that have unpaid PAYE during just those under current employment.to simplify the system for making beneit the year, avoid recalculations at the end Details including the full employeepayments to the unemployed or low of the tax year and permit HMRC to issue name, postal address, date of birthearners. Under the new Universal Credit penalties for late payment as soon as the and national insurance number willsystem and using the RTI data submitted employer becomes liable for one.monthly to HMRC, it will be possible for be required.18 Hyde Gardens www.plummer-parsons.co.ukEastbourne BN21 4PT01323 431 200 email@example.com
Real Time Information• Under RTI you will not be able to process any pay for new the RTI, despite being recognised by HMRC as an area that employees that fail the validation procedure with HMRC. continues to cause signiicant problems for them, as well as for Therefore, it is extremely important that the information employees and employers in the operation of PAYE. Given that provided to your payroll department or service provider is the RTI is being partially introduced by HMRC to help combat accurate. Particular issues identiied for employers include the issues caused by operating PAYE codes erroneously on old the use of shortened names, such as ‘Chris’ rather than data, it is disappointing that a new system for dealing with ‘Christopher’, and employees that have a default or ‘made P11D beneits has not been given more thought as part of this up’ date of birth making them in excess of 100 years old. initiative. The days of being able to submit information to HMRC about employees with slight inaccuracies in order to ensure Be prepared that the full pay and deductions can be calculated will be It is clear that many employers are not prepared for the eliminated. RTI changes whatsoever. Indeed, the short deadline for• Employers will be required to ile the full pay, tax and implementation will be a major concern for employers who national insurance information of their employees to HMRC operate their own payroll and who may not be fully aware of before the employees have been paid. all the changes. The developers of payroll software will also be endeavouring to ensure all the necessary changes to their• The submission of year end forms including a P14 for each product can be made in time. Those employers with nine or employee and the P35 employer summary and declaration fewer employees will be able to use the free HMRC software will be abolished. Under the rules of RTI, the information package, which will be compatible with the requirements of RTI. previously requested at the end of year will effectively be Unfortunately the RTI system will be enforced by further penalties, supplied by the employer on a month by month basis. The which have now become a customary feature of the UK tax employer will, however, need to notify HMRC that it is the system. inal payroll submission of the tax year, so this will need to Given the mandatory nature of the RTI scheme, some employers form part of the year end procedure. Whilst employers will will be keen to start the process as soon as possible. The inal still need to produce and keep forms P45 for leavers and deadline to volunteer for the pilot is 30 November 2012 for form P46 for starters, there will not be a requirement to send employers using HMRC’s Basic PAYE Tools. For employers not these to HMRC once RTI is in place. using the HMRC Basic PAYE Tools, the inal deadline to volunteer is 31 December 2012. To ensure the smooth transition overForms P60 and P11D to RTI, HMRC will be looking to include a wide variety of employers covering a diverse range of business types and sizes,There are no changes with respect to form P60 that will still need and they will also need to ensure the employer can use softwareto be provided to each employee at the end of each tax year. compatible with reporting under RTI. HMRC will review allThe form P11D which is used to report beneits and expenses for applications to join the pilot against these criteria and advise ifan employee will also continue to be reported separately from employers are eligible to join the pilot scheme.Make sure you seek adviceWe would recommend that you speak to your payroll administrator andsoftware provider to ensure that your business is fully prepared for thechanges afoot.For guidance on the implementation ofRTI, please do not hesitate to contact us.