Thursday 11 October 2012

Real Time Information (RTI)

You may have heard about HM Revenue and Customs new PAYE scheme which begins, for the majority of people, in April 2013.  The move to reporting information in real time is the biggest change to the operation of PAYE in 60 years.

What is RTI?

It is a system by which every time you pay an employee you send the information to HM Revenue and Customs electronically.  To compare it to the current system, it is the completion and filing of the employers annual return (P35) but on a pay period frequency and not yearly.

It will play an important role in supporting the introduction of Universal Credit by the Department of Work and Pensions. HMRC will pass to the DWP some of the information from RTI. They will then use it to adjust the universal credit payment according to the claimants earnings.

What do I need to do to prepare?

Fiona Wills Accountancy Services has arranged to upgrade their payroll software so for our existing clients all you need to do is check the employee information which is sent to you prior to April 2013 and arrange for any missing information to be provided before that date.

  • You need to confirm that your payroll software is capable of sending PAYE information in real time. If you don’t currently use software you should plan ahead now so your business will be able to submit PAYE information when required to do so. It must be sent electronically.
  • If you pay your employees directly into their bank accounts via the BACS system, using your unique Service User Number, you will need to add a cross reference or hash into the payment instruction. This is so that HMRC can match the payments employees received with the payroll data you report in real time.
  • Ensure employee information is accurate. You must ensure you have the following information for each employee:
    -    Full name
    -    Date of birth
    -    National Insurance Number
    -    Gender and
    -    Address

What happens if I have a new employee or one leaves?

Every person you pay for doing work for you, even on an ad hoc or casual basis should be paid through the payroll system.

When you have a new starter you need to collect the information listed above and ensure this information is available for the first time you need to pay your employee. You will not have to report the new starter separately as you do at the moment because the information will be inputted through the payroll report. However, if an employee arrives without a P45 then you can still use the P46 to ensure you collect all the relevant information.

When an employee leaves you will still provide parts 1A, 2 and 3 of the P45 form but you won’t send part 1 to HMRC.

HMRC commenced a pilot exercise in April 2012 and they have been working closely with the volunteers and making changes to the system as and when needed. Therefore the detail of the new scheme could change before next April. I will update this article as and when new information becomes available so keep in touch on facebook or twitter for updates.

If you require any assistance regarding payroll then please contact me via the website:

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