Expert guide: the nuts and bolts of RTI

Alex Rowson, technical director at payroll software house QTAC, explains the implications of HMRC’s Real Time Information (RTI) initiative and offers practical advice for small businesses and practitioners.

As has been explained elsewhere, HMRC’s Real Time Information initiative is essential to the successful implementation of Universal Credits scheduled for the autumn of 2013.

The other objective of the project is to make PAYE more accurate. When it is working, HMRC will be able to recognise where employees are receiving income from more than one employer, and adjust the tax codes accordingly.

The existing system does not provide HMRC with any data on employer tax and NIC liabilities at the end of each tax month, so RTI will help the department late payments and underpayments more effectively.

RTI “on-boarding”

The process of bringing employers into RTI is called ‘on-boarding’. Every employer in the pilot will receive a separate invitation to join RTI for each PAYE scheme that they operate, with an “on-boarding date” specifying when they should send their first RTI submission for each scheme. During the pilot only employers who have received an invitation from HMRC to participate in the pilot will be able to submit RTI files. The HMRC migration team have yet to decide the ‘on-boarding’ process for ‘Early Adopters’ and the mass migration of employers in 2013.

Payroll alignment

The first RTI submission needs to contain the necessary data to carry out a payroll alignment. This step will be achieved by submitting either an electronic Employer Alignment Submission (EAS) or a first Full Payment Submission (FPS)

After a successful response message has been received for either of these messages the employer will have started RTI and must comply with the filing regulations from that point on.

The key difference between the first FPS and a normal FPS is that the latter will normally only provide information for employees who have actually been paid in the period. The first FPS, however, must show every individual employed since the start of the tax year (even if they have left at that point or have not been paid in that period) to ensure that Payroll Alignment is completed correctly. Any records that HMRC have for any employee not on the submission will be updated to show that employee as having left that employment.

Pay Period Process

Once on-boarded the employer is required by the RTI regulations to submit a Full Payment Submission (FPS) for all employees paid ‘on or before’ each date of payment. This includes employees who would previously have been submitted on a P38 (A) supplementary return at the end of a tax year.

HMRC systems will check employee details in every FPS submission in order to identify the employee, and if an employee is submitted with no NINO (National Insurance Number), if a valid NINO can be established the employer will receive a notification of the NINO that should be used for that employee. This may be some days after the submission of the FPS and be communicated to the employer using the same channel as P6, P6B, P9, SL1 and SL2 notices are communicated to the employer or their agent.

Alex Rowson is technical director at Qtac Software, and chairs the BASDA committee liaising with HMRC on the RTI implementation programme. A longer version of this article first appeared in the ICPA magazine. More advice and information from ICPA is available from the institute’s directory page on AccountingWEB.

 

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Comments

How are HMRC going to cope with this...

dhalsey | | Permalink

Given that currently, they can't even process a Nil P35 until September following the 5th April year end submission!

 

Govt Gateway Servers

P2 | | Permalink

Does anybody know - are they planning to invest in more servers at the Government Gateway - expecially to cover downtime on the ones they have already commissioned.

Any news on this?

The uploading service has historically been very slow at times.  The monthly traffic is going to increase substantially in the months ahead.

Red Tape

rboggon.yahoo.co.uk | | Permalink

What about the less red tape promise from the Government!!!!!!

RTI data maintenance

Denis Lyons | | Permalink

 

What preparations should employers be making to capture information on other members of their employees household and ensure that the required information is kept up to date?

Linking the benefits and tax regimes (the core requirement for RTI) has a fundamental weakness as tax is based on the individual and benefits are awarded on the basis of the "household". 

Sage Payroll etc

jonbryce | | Permalink

This doesn't appear to be an option in Sage payroll unless I'm looking in the wrong place. Any idea when it will be available, or are we going to have the same sort of problems we had when iXBRL came out?

Sage Payroll solutions

neilson.watts | | Permalink

Hi jonbryce,

I can confirm that Sage 50 Payroll solutions (including Sage 50 Payroll and Sage 50 Payroll Professional) for the 2012/2013 tax year do have the ability to submit via RTI.  Currently we only expose this functionality remotely to customers or accountants who have been accepted into HMRC pilot phases during April to October 2012.

HMRC are opening up an early adoption phase for RTI from November 2012 through to March 2013.  We are currently recruiting through our accountants community to offer them the ability to bring your customers onboard early prior to mandation.  If you want to sign-up to this, simply visit bit.ly/RTIwithSageAD and you will be asked to login to our website (once you have logged in you can choose which of your clients you wish to sign up).  Its important to note however that you must ensure you obtain your clients permission to do this.

If you want to find out more about Sage and RTI please visit http://www.sage.co.uk/RTI

Neilson

Sage shortcuts

P2 | | Permalink

Are Sage users able to shortcut the Government Gateway servers or are we all in the same sorry mess?

re: Sage shortcuts

gg | | Permalink

Sage, along with everybody else who submit via the internet, must go through the Government Gateway as that is the portal that performs the security checks etc.

 

 

jep@albany.co.uk's picture

The Bacs side of things...

jep@albany.co.uk | | Permalink

Making your Bacs software ‘RTI Ready’ for the interim phase of the project requires a quick and easy file format change.

Whilst your payroll provider needs to re-configure the payment file you output from your payroll solution, your Bacs provider needs to re-configure your Bacs software to accept that revised file format. It’s a 5-minute job so should be a very low cost or free.

You'll probably need to send a sample payment file to your Bacs provider.  They'll then test the file and send you a ‘config’ file or parameteres, which you will need to apply to your software.

In order for HMRC to link the payment data to the associated RTI data, a randomly generated cross reference will now be included in Field 7 of the Standard 18 file used for Bacs (that's the file format change).  This cross reference will be generated by your payroll solution and used along with other items in the payment file to generate a ‘hash’. This ‘hash’ will then accompany the RTI submission allowing HMRC to match the payment to the RTI data at the other end. 

So, the Bacs element is simple but fundamental. You must ensure your Bacs software can accommodate the new file format from your payroll solution.  If you need more info or any assistance from a Bacs perspective, Albany Software's team will be happy to help.

employees BACSTEL-IP

ThornyIssues | | Permalink

"BACSTEL-IP supplier
• If you pay your employees through direct BACS, check that your payments software provider can accept and submit revised file layouts from your payroll software"

 

So just why would employees BACS payments be of use to an employers payments reporting tool then?

 

How are pensions and holiday

springacweb | | Permalink

How are pensions and holiday pay etc paid in advance for a period treated for RTI?.

 

We currently calculate  PAYE based on the period the pension is meant to cover i.e quarter commencing 6 April to the 5 June is paid to the pensioner to allow the cheque payment to clear their bank account by the 6 April. The calculation is therefore processed by say the 1st April. PAYE is calculated based on month 1,2, and 3  and the net payment made to the pensioner. The PAYE is accounted for to HMRC by the July due payment date.

 

The P60 correctly reflects the income for the year and the correct tax charge thereon.

 

Will RTI allow this forward calculation?