REAL TIME INFORMATION (RTI)
A new way to send payroll data to HMRC
PAYE (Pay As You Earn) is how employees pay Income Tax and National Insurance Contributions (NIC). Employers deduct the payments from employees’ pay each week or month. It was introduced into the UK in 1944 and has changed very little since then. However, the way in which employers and pension providers send information to HMRC (Her Majesty’s Revenue and Customs) is fundamentally changing to a scheme known as RTI (Real Time Information).
RTI is a new system introduced by HMRC to improve the operation of PAYE. PAYE information will be collected more regularly and efficiently as employers submit their regular payroll submissions, rather than with their end-of-year tax return. HMRC believe this will reduce errors such as under or over payments, reduce fraud and ensure people receive the benefits they are entitled to.
RTI comes into being for everyone from 6th April 2013 however larger employees with 250+ employees will be phased in up to 31st October 2013 when everyone should be using RTI. It is vital that you familiarise yourself with RTI now and make certain you understand its impact on your payroll processes.
2012/13 will be the last time the tax year ends with P14’s and P35’s. RTI will not have P35’s, P14’s, P38A and P38s. P60’s, P11D, P11d(b) will remain.
From 6th April every payroll, be it weekly, 2 weekly, 4 weekly or monthly will be submitted online on or before payment is made. Routines must be in place with the clients to ensure correct information is supplied to the payroll providers to help with submission.
Payrolls need to be checked before you go forward for the following:
- Correct names – these must be full names
- Complete Address and post code
- DOB (Date of Birth)
- NINO (National Insurance Number)
Everyone needs to be included on the payroll. If every employee is under the LEL (Lower Earning Level) you don’t need a payroll. If one employee earns above the LEL then everyone should be included on the payroll.
Points to watch out for:
- Payroll payment will need to be identified even if the business is a one person business.
- Dividends must be shown separate.
- Expenses must be shown separate unless included in the pay.
- Payments will need to match figures submitted to HMRC.
- PAYE audit will or maybe a problem – audits will take place and if what is paid does not reconcile with what is submitted then penalties may be incurred.
- Annual payments are still OK but Employer Alignment Submission must take place in April or whenever someone starts on the payroll and marked as irregular payments.
- It is still OK to run monthly as long as registered for annual payment.
RTI will also support the payments of Universal Credits providing DWP (Department of Work and Pensions) with up to date information. The code number should be correct.
On the whole HMRC will know what Tax and NIC (National Insurance Contribution) is due monthly and will chase if not paid on time. Penalties will be charged. Late submission will not receive penalties until 2014/15. Dates remain the same for reporting.
Employers need New Start Forms/P46 information so the starter can be included in payrolls.
The Employer Dashboard (an HMRC tool on the website which allows registration for PAYE and allows you to check payments) will show how PAYE is allocated. Client companies have access to this however, Agents do not get to see it.
New Engagement Letters will need to be place with each client.
- RTI – Real Time Information
- EAS – Employer Alignment Submission – a one-off submission to be used by HMRC to match and align company and employee records against the data it holds.
- FPS – Full Payment Submission – is the main and most common submission type. It covers the employee payments and deductions make each time an employer pays an employee.
- EPS – Employers Payment Summary – (Run when changes to above i.e. CIS)
- EYU – Earlier Year Update
- NVR NINO – Verification Request
Codes still in use:
- PAYE – Pay As You Earn
- NIC – National Insurance Contributions
- HMRC – HM Revenue & Customs
- SSP – Statutory Sick Pay
- SMP – Statutory Maternity Pay
- NINO (or NI) – National Insurance Number
- CIS – Construction Industry Scheme
If you would like to know more please drop us an email or phone us.