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As the HMRC launches its Real Time Information (RTI) pilots, HMRC’s Jane Brothwood looks at what it will mean for pay as you earn (PAYE)

This article was first published in the June 2012 UK edition of Accounting and Business magazine.

RTI is a new way of reporting PAYE information. It will enable employers and pension providers to tell HM Revenue & Customs (HMRC) about payments to employees/pensioners as they are made, rather than at the end of the tax year. Over time, this will allow HMRC to collect the right amount of tax and NICs from more individuals in-year. RTI will also support Universal Credits.

Q

When will RTI be introduced?

A

Most employers and pension providers will join RTI from April 2013, with all employers and pension providers reporting RTI by October 2013.

Q

How will RTI work in practice?

A

RTI reporting will be embedded into normal payroll activity. A wide range of payroll software is available, including some free products. HMRC’s free software, Basic PAYE Tools, is also available for employers with nine or fewer employees. For more information about the range of payroll software available go to: www.hmrc.gov.uk/efiling/paye/paye_software_forms.htm or speak to your payroll provider.

Q

How will RTI be introduced?

A

RTI will be introduced progressively to allow time for testing the new processes. We began piloting RTI in April with 10 volunteer employers. A further 300 employers/pension providers will join the pilot in May and June and up to 1300 employers/pension providers will be reporting RTI by the end of September. What’s more, by March 2013 we aim to have brought that figure up to 250,000.

Q

What is changing?

A

Employers and pension providers will no longer have to:

  • send an End of Year Return (P35, P14s and P38As) to HMRC;
  • send a form P45 to HMRC when an employee leaves, or a pensioner dies/leaves the pension scheme;
  • send a form P46 to HMRC when an employee/pensioner joins.

Q

What is staying the same?

A

The following remain the same:

  • the way tax and NICs are calculated;
  • the need to give employees/pensioners P60s;
  • the dates of payments to HMRC of PAYE income tax and NICs;

if required, the need to report expenses and benefits on a form P11D and pay class 1A NICs using form P11D(b);

  • the need to provide leavers with a P45; and
  • the need to obtain starter information.

Q

How will RTI benefit employers and pension providers?

A

RTI will remove administrative burdens of £300m a year from employers/pension providers, mainly by removing the end-of-year return process. Embedded processes will also mean better data quality, resulting in more accurate tax and NICs payments and fewer queries from employees or pensioners.

Q

Improving data quality: what needs to be done and when?

A

Data quality is key to the successful introduction of RTI. Employers and pension providers should check the accuracy of their employee/pensioner data. This involves making sure that surname, forename, gender, address, date of birth and national insurance number (NINO) are correct and in the right format for RTI purposes. Employers should also make sure that they add staff to their payrolls who will now need to be included with their RTI submissions; for example, those under the lower earnings limit (LEL).

Q

How can agents help their clients to prepare for RTI?

A

Tax professionals can assist their clients by:

  • talking to their clients about what RTI will mean for them;
  • making sure the client’s payroll staff know about RTI and what this means for their business;
  • reviewing their HR, finance, reward and payroll processes, including information flow and their business resources, to ensure they will be able to make their RTI submissions on time, whether weekly or monthly;
  • ensuring where clients operate their own payroll that they talk to their payroll software provider and, if they pay by Bacs, either their Bacs-approved solution supplier (BASS provider) or their Bacs-approved bureau.

Q

Any final comments?

A

HMRC is committed to a smooth and timely transition to RTI. We’ll continue to work closely with all involved in the operation of PAYE to achieve this.

Jane Brothwood is HMRC’s head of RTI Communications

Last updated: 8 Apr 2014