Senior Policy Liaison Officer Chartered Institute of Payroll Professionals
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Real Time Information: What you need to know

23rd Apr 2012
Senior Policy Liaison Officer Chartered Institute of Payroll Professionals
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AIA

With the Real Time Information (RTI) pilot under way, Diana Bruce from the CIPP presents an overview of the new PAYE regime and the changes you will need to consider ahead of full implementation in 2013.

By law all employers will have to submit RTI to HMRC by October 2013. This will mean reporting information to HMRC every time they pay their employees instead of summiting a summary form at the end of the tax year. Payroll software will collect the necessary information and send it to HMRC online.

The pilot project that started on 11 April will give HMRC, employers and software companies a controlled environment in which to iron out any problems over the next 18 months before filing becomes mandatory.

RTI: What to do next

• If you use payroll software, you will need to ensure it can submit RTI data. Check with your supplier.

 • If you don’t use software, start planning now to get a system that will be able to submit data RTI electronically when you have to.

• Firms with nine or fewer employees can use HMRC's free Basic PAYE Tools. A new version will be available once you are invited to operate RTI.

• If you pay your employees by BACS, you will need to include the hash cross references in your RTI submissions. Check with your BACS supplier or bureau.

• Once you begin to operate RTI, you may incur penalties if you do not submit your PAYE data to HMRC on time.

During the first month of the pilot, HMRC will work with 10 employers, representing a range of size, type and payroll software provider. The plan is to bring another 1,300 volunteer employers into the system by September 2012, expanding to 250,000 by March 2013.

RTI will become mandatory for all other employers, without exception, from April 2013 through to October 2013. The Department of Work and Pensions is driving the “all on board” timeline of October 2013 because RTI will have to be used employers by this date to support the introduction of Universal Credits.

Main changes for PAYE under RTI

All employers and pension providers will send details of all payments made (or to be made) through the payroll irrespective of the amount of pay (or pension).

There are three main changes that will happen under RTI:

  • Employers will be required to send information to HMRC about employees’ pay and deductions before or at the same time as they are paid by way of a Full Payment Submission (FPS). This information will be sent electronically using either:
    - HMRC’s free software for small employers – the Basic PAYE Tools
    - the internet via the Government Gateway
    - EDI (Electronic Data Interchange) – available until at least 2013/14
  • The year end process of submitting P14s for all employees and a P35 summary and employer declaration will no longer be required.
  • Employers will retain new starter forms P45 and P46 but will not be required to send them to HMRC. The P46(Expat) form ceases and the future of the P46(Pen) is also currently under consideration.

While no employers will be exempt from RTI, a small number who are exempt from online reporting and filing will have to comply with a slightly different set of RTI requirements. 

Areas that won’t change for PAYE under RTI

Employers will still have to issue P60s to employees and pension recipients following the end of each tax year.  Benefits in kind are not included under RTI so employers will still be required to submit forms P9D, P11D and P11D(b) if applicable, following the end of each tax year.  The way in which tax and NICs are calculated remains the same as do payments to HMRC.

Employer Alignment Submission (EAS)

The very first requirement under RTI is an alignment of employee details with the data held on HMRC’s NPS system.  For larger employers this will be done by completing an EAS and for smaller employers a First FPS (Full Payment Submission) which will include certain key details about employees.  In most cases HMRC will update their database with the details from these submissions and will then instruct you to start submitting RTI every time employees are paid, using a FPS.  Employers will be contacted directly with an instruction as to when they must do their alignment submission and in what format.

The fundamental difference between this first alignment submission (EAS or First FPS) and your regular submissions (FPS) is that you must include all details of not only active employments but also the details of any starters and leavers in the current tax year.  So if you are instructed to submit an EAS in the August of 2013, you must include details of any individuals who you have employed since 6 April 2013, regardless of whether they have since left your employ.  Once the EAS has been successfully submitted, the employer is considered to have joined RTI and can start sending FPS submissions immediately.

Data Quality

HMRC introduced its new National Insurance and PAYE Service (NPS) in 2009. The system combined 12 regional databases into one. The transition generated a large backlog as NPS generated new tax records where it encountered discrepancy, which resulted in the media furore when individuals were eventually notified they had underpaid or overpaid tax in the previous two few years.

The process was embarrassing for HMRC, but identifying the errors within the system has helped HMRC improve the accuracy of its data.  

Around 80% of the employee data errors were due to incorrect names, dates of birth or national insurance numbers. Whether you are employing ‘Mr or Mrs J Smith’ you must use the full and official name on your PAYE reporting. First names are very important, especially for common surnames.

The National Insurance Number verification service (NVS) is a new arrangement to help match data between employers and HMRC. Employers can request up to 100 NI numbers per single submission and the service can also be used to validate existing numbers.  HMRC will respond by either the internet via the Data Provisioning Service or by the Electronic Data Interchange directly to the employer or bureau.  A response can also be generated through incorrect NI numbers being entered onto a FPS or EAS.

RTI help and support

Guidance is still being drafted but it is hoped that final versions will be available by October 2012.  Follow the links below for further information.

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Replies (9)

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Chris M
By mr. mischief
23rd Apr 2012 17:04

Is it just me, but...

The more I read about this the worse it all gets.

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Chris M
By mr. mischief
23rd Apr 2012 17:06

In short, if intorducing Universal Credits requires all of this, then Universal Credits need to be scrapped forthwith!

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By taxhound
23rd Apr 2012 17:15

I am dreading this
All of April is spent sorting out P60s/P35s at present. With monthly filing, I can see this becoming a huge monthly task. I have a lot of clients drawing a salary of £624 per month, no deductions. I prepare forms for them once a year and each quarter I tell HMRC there is no PAYE payment due. Under RTI it will become a nightmare...

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By Fidodido
24th Apr 2012 11:01

Software

Not sure it will be onerous, i assume the software will just send everything to HMRC as it does now for personal and business tax returns?

If you do not use software, then yes, but Software is so cheap these days i do not see the point in doing it manually.

This is all on the assumption the software does it all though.

 

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By memyself-eye
24th Apr 2012 11:42

let me understand this

So the small pub (say) with a couple of part time bar staff paid under the thresholds and covered by P46's will have to submit monthly returns (using the free toolkit). What are the chances

a) of them having the facilities to do that

b) getting it right.

So when they claim staff costs at accounts time there will be hell to pay?

and no, it's not an accountant's marketing goldmine, the ones I know aren't profitable now.

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Chris M
By mr. mischief
24th Apr 2012 14:55

the accountancy challenge

I have just spent half an hour sorting out a PAYE "non-submission" because the previous accountant had given me the wrong reference - despite this the database logged me as the agent and issued me with a "successful submission" certificate on 14 April.

HMRC are now disowning this certificate and threatening fines if not submitted.  Also, as well as the stick this one has the carrot of being CIS with a big repayment due so worth the half hour.

If we are going to get all sorts of queries and knock-backs every single month then something has to give.  Clients will be asked for higher fees for which they can see no benefit, quite rightly it's just a cost the country is imposing on employers - yet another one.

The HMRC software is pants.  Clients use this despite my advice not to, and every year at this time I get questions because it can't cope with things the software I use can cope with fine.  I don't use the HMRC software, so suddenly I have to picture what sort of blunder someone has programmed into it and suggest workarounds, knowing that the alternative is asking the client to call the not-much-helpline, wait 30 minutes and speak to someone who is paid to get rid of them as fast as possible, regardless of whether the problem has been solved.

This is all very well once a year and I don't charge extra for these calls and I can mostly come up with something which enables the submission to proceed.  But once a month this will definitely NOT be OK.

 

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By Fidodido
25th Apr 2012 12:20

Time to get clients to change

All our clients use us as a payroll bureau and we use moneysoft, so there should be no issues. (hopefully)

I would use it as the starting point to get clients to start using your services for monthly payroll, or get them to use a software provider.

The benefits for the client can be easily explained.

 

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By Paula Sparrow
25th Apr 2012 15:53

Let's just be thankful

That chapter 5 of the original discussion document seems to have been scrapped!

That's the "just hand your entire payroll over to HMRC to calculate deductions and pay your workforce" idea if you didn't read it

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By stevenwarboys
26th Oct 2012 11:14

Notifying HMRC CIS to paid along with PAYE

I cannot find anything on HMRC website relating to RTI, CIS to be paid to HMRC and the FPS.

 

On the FPS you notify them of CIS suffered which is reducing the PAYE liability, however how do you tell HMRC that the payment they should expect will be more than just the PAYE liability?

 

anyone?

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