From 6 April employers will have to start reporting PAYE information to HMRC in real time. This is being referred to as Real Time Information - or RTI. Research suggests that only 4% of SME businesses are aware of the impending payroll changes, so there’s likely to be a bit of a scramble by many businesses to get things sorted out.
It was almost 70 years ago (back in 1944) that Pay As You Earn (PAYE) was introduced, and there have not been many significant changes to payroll since. The new system means that employers (or their accountant, bookkeeper or payroll bureau) will have to send details to HMRC every time they pay an employee, at the time they pay them and use payroll software to send the information electronically as part of their
The idea is to remove the problem that happens at the end of the year; whereby people are either left with overpayments or bills because it’s not been clear whether they have been paying the right amount of tax. HMRC is expecting that things will be made easier for everybody. RTI is expected to reduce administrative burdens on businesses by £300 million a year from 2014/ 2015.
The key changes are that payroll software will have to generate new reports and payroll information will be submitted online. This will include details of the amount employee(s) are paid, deductions, such as Income Tax and National Insurance contributions (NIC’s),and starter and leaver dates if applicable.
Details of all employees paid, including those who earn below the NICs Lower Earnings Limit, for example, students, must be included.
There is no longer any requirement to submit end-of-year forms P35 and P14 and the starter and leaver process is simplified. All starter and leaver information will be reported via payroll software each time an employee is paid.
The only employers to be exempt from electronic RTI submissions are those whose religious beliefs are incompatible with the use of electronic communications and individuals who employ care professionals to provide services to a disabled or elderly person in their home. These employers will be permitted to provide RTI on paper.
If you haven’t already done so what should you be doing to prepare?
- Check that the information you hold about your employees is correct. Around 80% of errors in employee data made on current PAYE returns are due to an incorrect name, date of birth of NI number. Employers will have to provide HMRC with details of staff members’ full names, addresses, gender, date of birth and NI numbers.
- Ensure that your systems are RTI-compliant. Depending on the payroll software you already have, this might not involve more than an update, but it may also mean that you have to upgrade to a whole new system. To check what you need, talk to your software provider or visit the Government Gateway to get further information.
- Make those responsible for payroll in your organisation aware of the changes and of the new process.
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