PAYE: Real time information to start in 2012

The draft of the Finance Bill 2011 set out new proposals for improving the operation of PAYE, including the collection of real time information. Rebecca Benneyworth reports.

AccountingWEB.co.uk took part in the recent HMRC consultation on improving the operation of PAYE. There were 400 responses to the consultation. The material published on 9 December indicates how the proposals will be taken forward.

The proposals for the collection of real time information (RTI) were broadly well received, and the government has decided to proceed with the implementation of this system as soon as possible. The changes will commence in April 2012. More detail on how it will affect parties involved with the PAYE system are set out below.

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Comments
bassett1's picture

Minor change - I don't think so....

bassett1 | | Permalink

If you speak to payroll software developers and payroll managers they certainly don’t think this change is ‘minor’. it is a major development using a new submission route to HMRC (via a third party - BACS) with a very challenging timescale - the appendix at the back of the condoc indicates the volume of data that will be required every time a payroll is run and when a payment of remittances is made. Please don’t underestimate the complexities of PAYE, we don’t just sit there pressing a button and it all goes swimmingly!

Kate Upcraft

PAYE technical writer

carnmores's picture

are we to presume that the continuining support for BACS

carnmores | | Permalink

means that central deductions are a shoe in albeit when and if RTI works well

Centralised deductions

0098087 | | Permalink

Centralised deductions are a disaster waiting to happen. HMRC are so out of touch with the way employers advise PAYE people of new staff it's amazing. We get notifications from 4 or even 6 weeks before and have to rerun payrolls. 

 

In January I am sending out a letter advising no more than 1 week and no one goes on the payroll without a completed P46. 

TomMcClelland's picture

I don't believe that they have thought through the whole BACS th

TomMcClelland | | Permalink

Is every employer with more than 50 employees (and apparently later *every* employer) going to be issued with a BACS ID? Are they going to get these BACS IDs for free? Normally they are very expensive and businesses have to jump through hoops to get them.

THe whole "BACS is the way to do it" choice is based on a misunderstanding by HMRC and an immense desire on their part to use BACS for ulterior motives. They've looked at the number of payments to employees that *ultimately* go through BACS, decided it is 90% of the total, so there is only a problem with the other 10%. NOTHING COULD BE FURTHER FROM THE TRUTH!

Firstly, even if we accept 90% of employees are being paid electronically, that is because *large* employers pay electronically. If you were to do the split by employer I doubt that you'd find that 50% of employers are paying their employees electronically. But it gets worse than that. Even amongst larger employers only a small fraction of electronic payments are being originated directly as BACS transactions. The rest go through numerous ancillary mechanisms first, including:

  • Employers emailing documented lists of payments to their bank
  • Employers going into their internet banking systems and typing in the payments to their employers
  • Employers going into their internet banking system and importing a proprietary file layout for the payment list
  • Employers going into a banking system issued by their bank running on their PC and importing a proprietary file
  • Employers going into a 3rd party banking system on their PC (eg Albany) on their PC and importing a proprietary file.

All of those systems are going to have to be amended to capture all the folderol of employee detail that HMRC requires, and to capture updated and overridden information that isn't accompanied by a payment. Our little payroll package that we sell to SME's supports about 15 different such mechanisms and we'll have to update all of them. Then the receiving systems will *also* have to be updated to capture the new file formats *and* all the middleware between the banks data-capture systems and their ultimate message to BACS will have to be altered too. The whole thing will cost numerous financial organisations in the UK hundreds of millions, and I don't get the impression that anyone at HMRC has thought about any part of this real-world detail of how electronic payments actually happen.

PAYE & Real Time Information

Peter Tucker | | Permalink

Get ready to be to be very worried. The capabilities of HMRC to understand what the consequences of their actions is widely acknowledged to be extremely low, so while the supply of Real Time Information of Employee's earnings may well be a very sensible way to manage Government Benefit payments in the 21st Century, there is every likelihood that chaos will ensue as those within HMRC tasked with implementing such a system have no real Requirements capability. This means that the software supplier will implement a system which is not fit for purpose and everyone involved in Payroll will suffer.

Time to get our point across and perhaps the best way is through the use of the new Payroll TV channel:

http://www.payrolltv.net/

I have sent several suggestions of those within HMRC who should be interviewed - questioned very carefully about these new proposals.

bassett1's picture

contributing to the debate

bassett1 | | Permalink

In terms of engaging positively with HMRC I would suggest that the industry uses the consultation fora that are already established with HMRC:

  • Meetings throughout January across the UK co-hosted by the IPP and HMRC
  • The British Computer Society Payroll Specialist Group
  • The Employer consultation forum co-hosted by the IPP and HMRC and attended by all the payroll and accountancy representative bodies

Unless we engage on a practical and detailed level with HMRC on this radical change we can't complain about the end result.
Kate
 

 

PAYE Real Time Information Consultation

Peter Tucker | | Permalink

A very intelligent observation, if you don’t engage in a process or its development, you forfeit the right to complain about the end result.

The suggestion that “the industry uses the consultation fora that are already established with HMRC” could be regarded by some as being slightly flawed since the membership of the HMRC Consultation forums are solely within the gift of HMRC. This gives rise to a somewhat exclusive grouping, a view that is supported, as some would say, by the fact that a member of the Institute of Payroll Professionals co-chairs HMRC Consultation groups. We have had evidence from the past that failure to ensure a comprehensive understanding of the details involved in a major change to the interactions between Payroll and HMRC’s PAYE operations can lead to unexpected consequences. It is not an easy task to ensure that a major project such as the introduction of Real Time Information is properly researched before any implementation is undertaken, but that is precisely what Senior Managers within HMRC MUST achieve. Perhaps a start could be made by seeking the views and experience of people who are not currently involved in the “the consultation fora that are already established with HMRC” ?

bassett1's picture

RTI consultation

bassett1 | | Permalink

That's exactly what HMRC are doing post Christmas. Although the IPP are facilitating some meetings there are a number of open meetings and they are also spending time with individual employers. This should provide sufficient opportunities to engage in the debate.

compupaye's picture

Bacstel-IP and Real Time Information

compupaye | | Permalink

We provide payroll services for nearly 400 companies but only a third of them use our BACS submission facility.  Many of our clients use internet banking, fax a summary sheet to their bank or upload a csv file direct using interface software provided by their bank through the internet. 

In my view, HMRC have not allocated enough time for the software industry to plan the necessary modifications. I contacted our payroll software provider  today but person on their helpdesk knew nothing about RTI.  No information was on our payroll software provider website either.

With reference to paragraph 6.7 of the consultation document, I am not sure that they have thought the whole Bacs thing through as I believe this requires more time for the banking industry and software providers.    Two months has passed since the second stage report but I have yet to see information on the Bacs website and our Bacs software providers website.  At this stage, it is unclear that much progress has been made within the banking industry.  Many bank managers do not have a clue about the Bacstel-IP channel so they will require additional training with the anticipated surge of new applications. 

I believe the banking industry will need more than a year to come up with a suitable standard and another year for the pilot testing.  Our clients will all have to complete indirect Bacs submitter forms where the banks will charge a minimum fee of £150.  One client was quoted £800 three years ago and a few of our clients were talked out of it by their bank managers.

I remember many years ago when online filing was introduced.  All our clients received £50 incentive the year it was first introduced.  There were problems then. Email receipts had no PAYE references and there were minimal data validation.  It took a further five years, more incentives and a report from Lord Carter to phase this in.    In my view, RTI requires extensive changes to our processes and with just a year to organise this will be challenging. 

richardterhorst's picture

Tax filing using the BACS system - ridiculous!

richardterhorst | | Permalink

 And here I am in the real world paying myself (an employee for tax purposes) when cash allows. So sometimes nothing, sometimes 3 x missed months, sometimes in the middle sometimes at the end. Sometimes I also pay myself a dividend.

Anyway can I trust any Gov department to have a link to my bank?

HMRC takes 3 months to reply to a simple letter. You go from pillar to post when phoning them, every IT initiative of Gov has had major failings. HMRC per parliamentary committee could not organise a piss up in a brewery (My interpetation of the committee's conclusion)

Ah well it will be fun and games. Again!

Using BACS

Peter Tucker | | Permalink

Worth noting that those Employers and Payroll Departments that receive PAYE Coding electronically at present, will have to use the BACS system in future.

So who knows what the file format for this data will look like, who knows the organisation to contact when there are problems or delays?

These and many more questions will ..........  blah, blah, blah

TomMcClelland's picture

DPS will continue to operate as it does now

TomMcClelland | | Permalink

I'm no fan of HMRC's proposals, indeed I believe that the whole BACS plan is deeply flawed, but at the HMRC-payroll software developers meeting on Friday they indicated that there are no plans to turn off DPS, so internet P6/P9/SL1/SL2 notices through the government gateway should continue to work exactly as they do now, for all employers.

bassett1's picture

but not if you use BACS to pay....

bassett1 | | Permalink

Hi

At the IReeN meeting last Tuesday HMRC said that if you submit RTI data by BACS you will have to move to receiving it via BACS too even though there are data protection and logistics issues in sending tax code info to a BACS submitter who may not be the payroll department or even the employer. So this will mean that not only the existing EDI users but also the internet filers who pay by BACS will have to move. It will be interesting to see if this pans out as one wonders quite what data volumes HMRC have had to guarantee to BACS to get this project off the ground.   

 

TomMcClelland's picture

They need to make their mind up!

TomMcClelland | | Permalink

At the Developers meeting at Euston Tower this question of tax code updates came up, and HMRC were absolutely explicit and definite that internet DPS will continue to be an option for *all* employers. That was the sense that I made of their answer, anyway. The question of getting such info back through BACS came up as a specific concern and that was their answer. For What Its Worth.

Sounds like different HMRC staff have understood the systems differently. Either that, or I suppose I misunderstood their answer. Some of this stuff does seem to swirl around a bit. They also *seemed* to indicate that there is going to be flexibility on who is allowed to file RTI through the gateway, not just limiting it to "small" or "medium" organisations, but with the proviso that those who file through the gateway will be required to continue to file P35/P14 at year end as well, whereas those who file through a payment conduit won't have to file P35/P14 any more. I piped up that this seemed like a big change in their strategy, but they responded that it isn't a big change at all, but I wasn't sure if they weren't back-pedalling at that point about whether *everyone* would be allowed to use the gateway for RTI if they really wanted to.

The developers of products who currently exclusively use EDI for filing were worried. It seems that EDI filing is to be shut down and some of them don't believe that they have the development resources to switch to internet gateway filing *and* do the RTI stuff.