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CPAA Insight: Are you ready for RTI?

27th Mar 2013
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Are you ready for RTI?

This article first appeared in the March 2013 edition of CPAA's membership magazine, Practising Accountant

Peter Green looks at the implications of RTI - the biggest ever change to PAYE operation

APRIL 2013 SEES THE SINGLE BIGGEST SHIFT in the operation of PAYE since its introduction over 60 years ago. In recent years we’ve seen the change from paper submissions for both in-year (P45, P46 etc) and endofyear (P14/P35) over to electronic on-line submissions, and these now have been largely accepted as being more convenient for employers and HMRC alike.

But now HMRC are completely overhauling the way employers account for the payments they make to employees, and this will led to an increased administrative and compliance burden for all employers, whatever their size.

The new Real Time Information (RTI) system requires employers to submit payment and deduction details to HMRC every time they make a payment to an employee. This information can only be submitted via approved Payroll software, not directly entered into the Government Gateway. 

With a weekly scheme, a submission has to be made every week, so a total of 52 submissions in a tax year rather than the current single year-end submission. Importantly, the submission must be made either before or at the same time as the payment is made to the employee.  

Add in other pay frequencies, CIS deductions, Student Loans, SSP and SMP compensation, and the number of submissions soon climbs. And this is now a statutory requirement for employers, the submissions must be made on time, every time, or employers will risk at best compliance visits and audits, and at worst penalties and fines.

So why are HMRC doing this?  Well it largely revolves around the introduction of Universal Credits, and the associated drive to reduce benefit fraud (estimated at £5 billion per year).  Also, it will make PAYE more accurate for individuals, currently some five million tax payers receive a repayment or a bill every year.

This will be achieved by improving the accuracy of employee data held both by employers and by the HMRC.  By checking the employee status and details every time they are paid, rather than just retrospectively once a year, HMRC will be able to spot anomalies much more quickly, and of course make sure that the employer is paying over the correct amount of tax and NI each month!

So what should employers do? Ensure employee information is completely accurate and up to date, with full names, exact addresses and of course National Insurance numbers. Then, make sure Payroll software is fully RTI compliant and the correct version is installed and ready to go. Finally, ensure staff have been trained in the new procedures and requirements.

Once up and running, it is then a case of building the new submission procedures into normal payroll routines, remembering that a return must be sent to HMRC every single time an employee is paid.

Peter Green is MD of CSS Sage Solution Centre, a Sage Platinum Partner and holder of the Sage Circle of Excellence award for outstanding customer service. The company provides support and software update services to users of Sage Payroll and Accounting software and holds regular seminars for existing clients and other organisations.  

For copies of slides from a recent RTI seminar please email [email protected]

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