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For nigh on 70 years, the PAYE system has operated to require employers to deduct, and account for, income tax and national insurance contributions on employees’ pay. Remittances have been made in-year and an annual reconciliation (through the dreaded P35) has been completed to identify any under, or over, payments of tax.
R(eal) T(ime) I(information) is a move away from this, now dated, approach to a system that will require an online submission every time a payroll is processed … and it is coming to an employer near you.
HM Revenue & Customs tell us that RTI is designed to make the PAYE process simpler for everyone, as well as being more accurate and reducing the number of coding notice errors. So far so good. But remember, having the information (in real time) on the amounts of income tax and national insurance due to be remitted, HMRC will be in pole position to chase late payments. So any employer who may have made use of Bank of HMRC will find ‘advances’ less forthcoming and much more costly in future.
That future isn’t far away either. The pilot for RTI is already underway with a selection of employers and software houses. A good number of our clients to whom we provide Payroll Services are taking part in that pilot. RTI goes live in April 2013 and all businesses will be ‘invited’ to enlist by October 2013.
Essentially, RTI replaces the stressful year-end P35 Return with a submission on or before you pay your employees for any period (whether weekly, fortnightly, four-weekly, monthly or whatever). When RTI launches, information will be able to be submitted to HMRC either through the (free) Government Gateway or the Electronic Data Interchange (EDI) channel or, in time, through BACS. Most software houses will be updating payroll products in time to allow these submissions to be made. Some payroll software won’t be RTI-compliant and you should be confirming the position with your provider.
Now is the time all employers must be preparing for RTI, because Payroll Alignment is on the way. In essence, Payroll Alignment is just making sure that your records, and those that HMRC have, are in agreement. If there are any differences, HMRC will simply use the information that you provide. The alignment submission will take different forms, depending on the size and circumstances of the employer, but will need to be completed either before, or at the same time as, your online submission for the first period under RTI.
Payroll Alignment will call for details of all employees for that tax year, including starters, those who have left already and even those who haven’t yet been paid. Currently, there are 137 (yes, one hundred and thirty-seven) individual data items that could be required, ranging from the expected such as name, date of birth, gross pay etc through to the unexpected, notably passport numbers for foreign workers, banding of contracted hours for all employees, tax free payments, payments to casual workers. The list goes on.
It is going to be critical that employers have to hand correct and complete details. In current implementation, it is a case of getting it ‘Right First Time’. With no amendment facility, accuracy is going to be paramount. For that reason, it makes sense to get on the case now to make sure you can complete the boxes with information that has been checked and confirmed with each employee. For clients who take our Payroll Services, we are on the case to do that for them.
If you find that payroll processing (in this easy-to-use, simpler form (aye right)) is all getting too much, you should consider the outsourcing option which many employers, large and small, have already taken advantage of. We will be happy to advise on the merits of outsourcing in your particular circumstances. When you consider the stress and grief of each payroll run, never mind the opportunity costs, the outsourcing option may be a very acceptable remedy.
John Hume penned this update and can be contacted at email@example.com or on 0131 440 5000.
This is a general guide which is intended to give background information and is not a substitute for taking specific advice based on your particular circumstances.