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
- Expert guide: The nuts and bolts of RTI
- Real Time Information: What you need to know
- Sign up for HMRC email alerts on RTI
- AccountingWEB RTI coverage
- HMRC RTI homepage
- HMRC FAQs
- HMRC Data Quality homepage
- HMRC RTI webinar - how payroll alignment works.
- Software vendor info: Advanced Business Solutions, Keytime, Pegasus, Qtac, QuickBooks, Sage