Real Time Information checklist

HMRC recognises that it has a massive undertaking in hand to deliver real time information (RTI) for PAYE within the tight deadline laid down by the government.

Beginning in April 2013, RTI will replace the usual end-of-year PAYE efiling process with electronic submission of data to HMRC whenever a payroll is run. The exercise will help HMRC process tax codes more efficiently and will pave the way for the tax department to exchange data with the Department for Work and Pensions to support the introduction of the universal credit. Most employers will be invited to join the scheme from April - unless they opt in early for HMRC’s pilot scheme. Some larger organsations with 5,000+ employees may have a little longer to come on board between June and September.

The crucial area for all concerned - and one of the underlying reasons for the move to RTI - is the need for employers to “align” their data with HMRC’s. It’s clear the department’s data is a mess, and the wording surrounding RTI cannot conceal that RTI is being used as an opportunity to get employers to help cleanse the database. Pay particular attention to this requirement, as it is likely to be the most demanding element of RTI.

From the copious materials provided by HMRC and software vendors, this checklist will point you to further information and resources to help plan your transition to RTI.

RTI time table and action plan

With six months to go, we are now entering the crunch phase for RTI. HMRC is reporting smooth progress from its pilot scheme and is inviting more employers to join.

  • If you haven’t already done so, set up an RTI action team to research and implement your RTI plans. AccountingWEB’s RTI coverage and HMRC’s RTI website can help.
  • Communicate those plans to clients/advisers (whichever is appropriate) and with employees.
  • Check that your software is ready via HMRC’s accredited products page and your supplier.
  • If compatible software will not be available, you may need to consider replacing your existing payroll system, or switching to an alternative method (see RTI submissions below)
  • If you’re confident and ready, consider joining the HMRC pilot scheme it’ll save you having to submit P14s and P35s next April-May.

Where your systems and processes may need to change

  • Your employees’ payroll records will need to be checked against the records HMRC holds and the department’s data quality standards.
  • You will need to collect new information to submit via RTI, including contracted hours  (one of four range options, not actual hours worked), and irregular employment indication - to prevent occasional employees being dropped from HMRC’s database if no payment is made for three months. Collecting and submitting employee passport numbers is an optional extra HMRC would appreciate to help it match records in the last resort.
  • Payment process: RTI submissions will need to be made when or before payments are made. If you use Bacs to pay employees, you will need to include the RTI cross-reference (“hash” number) against each payment.
  • New starter sequence - P46 new employee tax code forms are being abandoned, but two-part P45 forms are being retained for employees and new employers. Employees may turn up at their new jobs with their portion of the form, but under RTI information about their pay and tax for the year to date will be sent automatically when you report your PAYE information.

Some things won’t change

  • End of year P60s will be retained, but will be automatically generated by ticking the “final payment” field in your payroll software (or HMRC Basic PAYE tools).
  • Expenses and benefits returns including P46 (Car), P9D, P11D and P11D(b) will still need to be submitted electronically via PAYE Online, with Class 1 NICs paid on any taxable benefits reported.
  • HMRC’s payment dates will remain the same each month - 19th (via post) and 22nd (electronic payments).
  • Reporting changes in circumstances: RTI submissions will not update HMRC records. Individual employees will still be responsible to notifying HMRC of changes of name, address and so on.

RTI submission options

  • HMRC Basic PAYE Tools - restricted to employers with fewer than nine active PAYE recipients
  • Accredited software providers (this list will grow between now and April)
  • EDI - used by larger employers,  this mechanism will be supported until 2016
  • RTI-equipped web payroll services
  • Payroll bureaux - remember, you will still need ensure they will have data in the correct format.

Potential trouble spots

  • Payments to employees below the lower earnings limit will not need to be included in RTI submissions.
  • Potential problems for one-man companies paying themselves low salaries and the rest in dividends.
  • CIS - This should be reported for most companies via RTI, but advice is sketchy on how to go about recovering amounts deducted.

More RTI resources

 

Comments
John Stokdyk's picture

Work in progress

John Stokdyk | | Permalink

This checklist attempts to distil a wide variety of information - but is nowhere near complete. Those who are closer to the pilot scheme and technical snagging tell me that they anticipate a lot more troublespots to emerge as more larger numbers of employers come on board and more esoteric scenarios pop out of the woodwork. 

If you are aware of any of these, please comment below. We'll look into them and add them to our checklist with pointers to the solutions.

trevorb's picture

RTI    1 thanks

trevorb | | Permalink

My understanding is that employees paid below the LEL will need to be reported if a payroll scheme is in place. The only exception is that if they happen to be the only employee (and therefore no payroll scheme is required) then the employer will effectively be outside of RTI.

I also believe that following a lengthy debate with HMRC they are going to retain the P46 for employers to download and use (they will still need to gather the information required on the first page from the employee if there is no P45), even though the details will be submitted to HMRC on the FPS in the same way as the P45.

Other potential trouble spots are casual workers and those paid at the end of a shift (e.g. bar staff), and advances made to staff part way through a month (or week), due to the rules requiring submissions to be made 'on or before' payment.

Trevor Blackmur ATT

re: Employees below the LEL    1 thanks

gg | | Permalink

Employees who earn below the LEL must be included in the FPS, unless their income is not required to be reported under PAYE.

Check out the Employer FAQS on HMRC's site - Q: Is an employer required to submit RTI returns if they do not currently have a PAYE scheme to submit PAYE returns and do not have any employees earning above the LEL

http://www.hmrc.gov.uk/rti/employerfaqs.htm#4

RTI    4 thanks

johnporter | | Permalink

Is this now the Death Knell for Small business.

Before when you employed someone you calculated the amount of Tax & NI paid to Tax & sent it off to HMRC not to onerous although understanding the Tables was not always easy.

With the introduction of Computers small business added burden of Child Maintenance & student Loan deductions with the added benefit of increased employer NI contributions

Now adding in RTI and in the near future Pension contributions (another scandal waiting to happen when people discover the so called pension is little more than pocket money in 20 years time after the money men have got there cut look at the contraction out scheme when it became available) to calculate for the ordinary man /woman it must be questionable if worth employing anyone.

By the way what happened to that waste of space called Vince Cable going to cut red tape etc  to small business aye right what's his next joke 

 

 

Multiple payrolls under same PAYE ref    1 thanks

Mike Nicholas | | Permalink

It is not unusual to find employers operating more than payroll system under the same PAYE ref. For example, senior managers and directors may be paid monthly whereas other staff are paid weekly.  

In April 2013, HMRC are introducing functionality which will allow the employment alignment submission (EAS) and/or the first-FPS (full payment submission) to be sent in two or more parts - which thereby accommodates multiple payroll systems. Until then, employers entering the pilot or joiing RTI early will have to combine payroll records from two or more systems into one EAS or first-FPS where the same PAYE ref is used.

TomMcClelland's picture

P46 A/B/C declaration required for all now    1 thanks

TomMcClelland | | Permalink

trevorb wrote:

I also believe that following a lengthy debate with HMRC they are going to retain the P46 for employers to download and use (they will still need to gather the information required on the first page from the employee if there is no P45), even though the details will be submitted to HMRC on the FPS in the same way as the P45.

 

In fact *all* new starters will need to complete the equivalent of the P46 A/B/C declaration, even if they supply a P45. This is a new requirement. Really the P45 (3) should have a box on it for this now, to streamline document requirements going forwards, but HMRC doesn't seem to have thought of that or doesn't want to redesign the P45 again.

Pilot Scheme

Oppco | | Permalink

We run a payroll bureau and registered a few clients for the pilot scheme

To our horror, HMRC have without warning changed the postal address of these clients to the block of flats next door, and the 'invitations' have been sent there. We only found out when one of our neighbours put a letter through our mailbox, as he recognised the name

We do not have a key for next door

HMRC have told us we will need to correct the addresses. There are about 500 of them!

How will we know who has been sent an 'invitation'?

 

 

 

 

 

RTI- as usual.    1 thanks

David Gordon FCCA | | Permalink

 Is it typical of advisers to advisers?

That almost the first line on this information blurb says "Set up an RTI action team".

Thus quietly, (happily?)  ignoring the fact that there are thousands of accountants in public practice, or business, who do not have the possibility of, or luxury of a "Team".

Whose team might consist of their right hand, their left hand, and the right foot (For kicking the computer through the window).

With tens of thousands of enterprises whose payroll department has hitherto consisted of the kitchen table, or equivalent.

This system is B*ll***t. It violates the first law of computing management You start with garbage you end up with garbage. I wonder how many of us have observed the lesson over the years, that one cannot clean up an accounting mess by use of the expedient of installing a new whiz=bang IT system. HMRC ought to have been told to first clean up its act.

Unfortunately neither the ICAEW nor the ACCA have the gumption to give HMRC this basic bit of textbook management advice.

Serious comment-RTI    1 thanks

David Gordon FCCA | | Permalink

My practice runs payrolls for a number of typical very small businesses. (1 to 5 employees / CIS). On average my clerk spends 10 hours each month on the task. In each run we include any CIS submissions.

For this to be an economical operation the system has to be opened and run as a batch job at the end of each month, with clients trained to supply pay information by the 25th (typically). In anumber of cases the employer will advise us what has been paid, for us to work out "Backwards" what the gross the and is. See note below.

1) We are not part of the "Paying " process. That is for the client to deal with on receipt of the payroll data.

2) No software of this nature may be run safely and economically except and unless it is so run as a batch.

3) Similar to many practices we already run this service as a "Loss leader". We persist mainly because if we do not, we recognise that preparing the client's annual accounts /tax  might well end up a nightmare.

We know that our section of the accountancy market comprises thousands of small businesses, but HMRC have made no real attempt to be reasonable. "The computer rules, Long live the computer".

Note: This is not unusual. We know of a major international company whose standard contract of employment for certain non-executive key employees- on variable working hours / on UK PAYE- specifically quotes those four figure daily rates as "Net of taxes" -

 

 

 

 

TomMcClelland's picture

Exactly so, operational efficiency is not HMRC's problem...    1 thanks

TomMcClelland | | Permalink

David Gordon FCCA wrote:

 In anumber of cases the employer will advise us what has been paid, for us to work out "Backwards" what the gross ... is. See note below.

1) We are not part of the "Paying " process. That is for the client to deal with on receipt of the payroll data.

Essentially this "order of play" will no longer be permitted. The RTI filing is to be made to HMRC *before* the payments to the employee.  Regardless of economic considerations concerning the efficiency of bureau/practice payroll operations clients will have to furnish data (be it net or gross pay) to their payroll processor (you in this case) before they pay the employees, so that you can prepare their payrolls and file RTI submissions before the payment. If this means that your charges have to rise to allow for the inconvenience then that is between you and your clients and presumably HMRC regards it as none of their concern.

This is perhaps the point that you were making, but I thought that I would spell it out for the benefit of those who read this thread. It is also important to note that the requirement to file before payment applies to weekly payrolls as well as monthly ones, so weekly payrolls will be filing 4/5 times monthly.

HMRC spreading the word of RTI    1 thanks

confused.com | | Permalink

I attended a 'seminar' last month, hosted by SWAT, on RTI. Unfortunately the two speakers were 'HMRC Agent Account Managers' (a scary thought). If these individuals are at the forefront of banging the RTI gong then it doesn't stand a chance of working. It did not take long to make one realise that HMRC does not know what it is doing: no questions posed during the seminar were able to be answered, but were noted to be responded to after due consideration.

The SWAT members were visibly embarrassed and angered by the hopeless efforts of HMRC and were actually able to answer questions that HMRC couldn't.

If this is the best that HMRC can do, it spells disaster for payroll. Running some 40 payrolls, I am not looking forward to April.

 

Additional Unwarranted Payroll Cost

Peter Tucker | | Permalink

It appears that Sir Humphrey has a job with HMRC as evidenced by a recent statement by one of their spokesmen to the CIPP-

"The hash provides an additional level of assurance to the PAYE reporting and also helps focus our employer compliance work by further informing existing risk assessment where payment is made via Bacs using the employer’s own Service User Number. The hash will also provide an additional level of validation for DWP when calculating Universal Credit awards."

The statement is obtuse and there is absolutely no evidence that:

A) there was any additional level of assurance in respect of the proper operation of PAYE, required. B) the use of this hash provides an additional level of assurance.

The statement also notes that failure to match Bacs Has Keys, in the RTI data file will NOT have any impact on the payment of the correct amount of Universal Credit!!

We are therefore in the situation where additional costs have been loaded onto Payroll for no proven reason.

Should writing to your local MP with a complaint be considered as HMRC has no Minister to control them????