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HMRC stands firm on RTI go-live date

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11th Nov 2011
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HMRC has said it will stick to a plan to introduce a ‘real-time’ pay-as-you-earn tax system by 2013, despite concerns from employers and payroll software companies that the timetable is “unachievable”. Nick Huber reports.

As part of a plan to modernise PAYE, which was introduced in 1944, employers will send information about tax and national insurance they deduct from employees’ wages to the Revenue when they are made - rather than at the end of the tax year as happens now.

The current system causes overpayments and underpayments of tax because some information is out of date.

RTI timetable

Q: When will it happen?
A: Employers and pension providers will begin to use the RTI service during April-October 2013. All employers will use the RTI service by October 2013.

Q: How can employers be sure it will work?
A: HMRC will pilot RTI with volunteer software developers and employers and pension providers for a year, starting in April 2012.

Q: How can employers be part of the pilot?
A: Plans for the April 2012 pilot are already well advanced and no additional employer volunteers are needed. However HMRC are looking at how to bring more employers onboard later in the 2012-13 tax year.

Q: As an agent who files PAYE submissions for a number of employers, do I need permission from my clients before I could take part?
A: Yes. An agent would need to have the agreement of the client employer.

Source: HMRC

Real-time earnings information could be sent to HMRC automatically using payroll software via the BACS payment network. The new system is expected to be working October 2013.

In a response to an HMRC consultation in December last year, three quarters of respondents who had a view on the proposed timetable for introducing real-time PAYE thought it was “unachievable”.

But in a summary of responses to its consultation document on real-time PAYE information HMRC said the timetable for the introduction of the “universal credit” in 2013 to replace many benefits and tax credits meant “there is no flexibility in terms of the ultimate go-live date of RTI.”

To help smooth employers’ transition to real-time earnings information HMRC said it would “align its employment records with those of the employers”.

Software suppliers told HMRC in the PAYE consultation that the proposed timescale did not allow sufficient time to develop and test products in time for to be ready by April 2012.

In a concession to software companies, HMRC has said that not all software products would need to be ready for real-time PAYE by April 2012. Instead, software products will be tested for one year - starting in April 2012. Software suppliers and employers can volunteer for the scheme.

Karen Thomson, associate director of policy, research and strategic visibility at the Chartered Institute of Payroll Professionals (CIPP), said that it was encouraged by HMRC's efforts to work with accounting firms to explain what the PAYE changes will mean for employers.

She said the trial of the payroll software should flesh out any "anomalies". Employers who make payroll errors under the new system, such as telling HMRC the wrong hours worked by an employee, or the wrong leaving date from a job, could be responsible for an individual losing their benefit entitlement because the Universal Credit will rely on PAYE information, Thomson said.

UPDATE (Monday 14 November): The government is publishing draft regulations today to pave the way for changes to PAYE, National Insurance contributions (NICs) and the Construction Industry Scheme (CIS). Treasury secretary David Gauke will unveil the documents at an 11am press conference, after which the documentation will be available from the HMRC consultations web page. A further paper outlining the options for merging income tax and NICs will also be published.

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