CIPP guide to RTI: Your first submission
Over the last couple of years there have been many articles written about Real Time Information (RTI), from concept through to consultation and on in to detailed articles about when it will come in and how we should prepare, explains the CIPP’s Helen Hargreaves.
With the countdown now at around six weeks before the vast majority of employers embark on their RTI adventure the CIPP thought it was time to tell you how you would practically deal with common situations which occur in day to day payroll.
Over the next two months we will outline various scenarios and explain how to report them in RTI.
Let’s start right at the very beginning…
When to send your first submission
Most employers will now have received a letter from HMRC telling them to start operating PAYE in real time from 6 April. For those with a pay date around that time, this could be more complicated than you think.
HMRC will be ready to accept submissions from 6am on 6 April 2013 and employers should expect to receive acknowledgements from the government gateway and the results of HMRC validation as normal from that point. If you do experience a delay in receiving a response don’t be tempted to re-submit as this could create duplicate returns. You must not send PAYE information in real time before 6 April as your submission will be rejected, even if you have run your payroll in advance of a payday after 6 April. The only exceptions are those pilot employers already reporting in real time in 2012-13.
HMRC will match the employee details on your first report against the records it holds for employees within the employer’s unique PAYE reference number. This is called payroll alignment. The first report after 6 April is used as the “matching” report. In most cases, employers will submit employee details for payroll alignment when they pay their employees for the first time in the new tax year, on or after 6 April 2013, and send in their first Full Payment Submission (FPS). In some instances, those employers with more than 250 employees for example, HMRC may ask employers to submit a separate submission called an Employer Alignment Submission (EAS) before submitting the first FPS.
At this point I must make an important observation, which applies to all of the issues included in this article, and that is that different payroll software providers have addressed the RTI requirements in different ways. For example, one major provider will be aligning data through an EAS for all their users rather than just those with more than 250 employees. For this reason, it is vital that you talk to your software provider so you understand how your software is going to work for you.
Once the EAS has been successfully submitted you are considered to have joined RTI and you can start sending FPSs immediately. HMRC recommends that employers wait until the following day to send their first FPS. However if circumstances require an employer to send the EAS and first FPS on the same day please wait 30 minutes in between submitting the EAS and the first FPS so that the FPS does not 'overtake' the EAS during processing. More information about payroll alignment is available on HMRC’s website.
Although fine for the majority of employers, this will cause problems for those employers who do run their payroll on or around 6 April because they will process the payroll a few days in advance. These employers may be unable to comply with the requirement to make a submission to HMRC that complies with the “on or before” rule.
In these circumstances HMRC has relaxed the requirement to submit the FPS on or before the day payment is made to the employee and have provided guidance on what employers should do if this situation applies to them.
|Payday/payroll processed (2013)||When to submit (2013)|
|Payday is 6 April. Employer processes the payroll on 6 April and pays his employees by cash||Send FPS to HMRC on 6 April|
|Payday is 12 April. Employer processes payroll on 10 April||Send FPS to HMRC on or before 12 April|
|Employer pays weekly. Payday is 7 April. As this is a Sunday, the employer completes the payroll on Friday 5 April and pays his employees by cash in advance for 7 April.Next routine payday is 14 April||1. The first real time submissions should be submitted on or before the next routine payday (14 April). The first submission should contain “this period” details for the 14 April payment date and include YTD information relating to payday 7 April 20132. If this is s not possible, the EAS and FPS/First FPS for the payment date of 7 April should be submitted after 6 April and before the submission for the next routine payday on 14 April|
|Employer pays monthly. Payday is Monday 8 April. Employer processes pay on Friday 5 April and instructs bank to pay on Monday 8 April via faster pay.The next routine payday is 8 May||1. The first real time submissions should be submitted on or before the next routine payday (8 May). The first submission should contain “this period” details for the 8 May payment date and include YTD information for payday(s) processed before 6 April for payment on or after 6 April 20132. If this is not possible, the EAS and FPS/First FPS should be submitted after 6 April and before the next routine payday on 8 May|
You can find more information about making your first RTI submission on HMRC’s website.
What to do if the amount shown on the FPS differs from the payment you have sent to HMRC
HMRC will use the information on the FPS to calculate how much tax and NICs to expect from you each time you pay your employees. If you haven’t paid anyone during the pay period, or the amount you are paying HMRC differs from the amount you have deducted then you must submit an Employer Payment Summary (EPS).
During the RTI pilot, more than 70% of the apparent underpayments HMRC investigated were due to the fact that the employer had not submitted an EPS.
The situations where an EPS would be needed include:
- No payment is due - no employees or subcontractors have been paid for this pay period
- If you have recovered statutory payments
- You have recovered NIC compensation
- Construction Industry Scheme deductions made from payments you receive if you are a limited company
- If you're registered for the Regional Employer NICs Holiday for New Businesses scheme
More information about the EPS is available on HMRC’s website.
Ending the tax year in real time
And finally for this month, we will look at what is required at the end of the tax year. For most employers this won’t take effect until April 2014, but those employers who are on the RTI pilot will be getting ready to close the tax year in real time.
You will all have heard that the P35 will no longer be part of the PAYE process once an employer starts to submit in real time. Instead, the end of year declaration needs to be made as part of the final FPS or EPS that you submit for the tax year. At the end of the tax year, submit your final FPS and/or EPS for the pay period as normal. You must indicate that it is your 'Final submission for the tax year' and then answer the end of year declarations and questions that will be familiar to you from the P35 form. You must do this even if you have not made any deductions of PAYE tax or National Insurance contributions (NICs) from employees in that pay period.
If you submit more than one FPS in a tax month, for example, for weekly and monthly payrolls, your final submission will be the last FPS or EPS that you submit for that tax year, regardless of whether it relates to the weekly or monthly payroll.
But the most important difference for you to remember is that the deadline of 19 May, which has always existed as the ultimate deadline for submission of the Employer Annual Return, will not apply once you start submitting information in real time.
If you are submitting a final FPS, indicating a payment being made, you should submit this no later than the 5 April. If no employees are being paid during tax month 12 you will need to submit an EPS, including the end of year declarations and confirmation that this is the final return for the tax year, no later than 19 April.
The deadline of 31 May still remains for you to issue forms P60 to all employees who are employed by you on 5 April. Duplicate P60s no longer need to carry the annotation “duplicate” as has previously been required.
Next month we will look at how to amend information you have already submitted on an FPS, and what you should do when you receive a P45 from a new employee, the answer may not be quite as straight forward as you think.
Helen Hargreaves is a senior policy and research officer at the Chartered Institute of Payroll Professionals (CIPP).