Final preparations for the roll-out of RTI from 6 April should be underway at this stage for accountants and their clients.
Queries and comments about the PAYE change have been flooding into Any Answers as practitioners’ attention swings from self assessment to RTI. This article summarises key points that have been raised in the past few weeks and points you at further articles, answers and resources to help your preparations.
What is RTI?
Just in case you don’t know yet - which is unlikely - RTI is a new PAYE regime under which employers need to file information online each time they pay employees, rather than doing a reconciliation of payments made throughout the year and submitting them on the traditional P14 and P35 year-end forms.
To handle RTI submissions, you will need RTI-ready systems, ranging from HMRC’s free Basic PAYE tool, which can cope with up to nine employees, to more widely used commercial packages. Organisations not yet equipped will need to get someone to file for them, or get new software. HMRC's list of recognised software is a good place to start, and its business readiness checklist will give you a wider overview of the requirements.
HMRC began sending out RTI notification letters last week, which some AccountingWEB members have already received.
Most employers will join RTI from 6 April. When a small business completes its first payroll run, the initial full payment submission (FPS) will update HMRC’s database with employee details. Make sure to include employees' full names and details, otherwise the submission could be rejected.
According to Rebecca Benneyworth, at this late stage practitioners shouldn’t be concerned with what RTI is, but the steps they need to take in the coming weeks to prepare - particularly if they're using it as an opportunity to take on new clients.
Among the most common queries are:
- How to deal with directors who take most of their income in the form of dividends - directors of one-man companies can continue to pay themselves below the lower earnings limit and so avoid having to operate a PAYE scheme. But if any employee is paid above the LEL, then the payment details of all company employees (including directors, if they have contracts of employement), have to be included in RTI submissions. Flags in the software allow you to identify those who are paid infrequently. Use this for any directors in this situation, as filing three consequtive monthly nil returns could see them disappear from HMRC's employee list. Also see Rebecca Benneyworth's analysis of the issue in RTI troublespots: Low-paid directors.
- The New method of dealing with new starters’ tax codes, rather than traditional P46 - you will not need to submit any joiner or leaver information as the RTI submission itself covers everyone being paid by the employer, advises Paul Scholes. You will still have to issue form P45 to a leaver to take to his new employer so that they can pick up his PAYE code and gross pay and tax to date correctly.
- Interaction with CIS - Those filing CIS300s should continue doing so. HMRC will use the information to match the amounts offset within the employer's payment summary (EPS), which should arrive at total liability, advises Tom McLellan from 12Pay, who has answered many, many questions on RTI issues to date.
AccountingWEB has also documented numerous debates and arguments about the transition, including:
- RTI leading to more winding-up orders as employers have to come clean about PAYE liabilities
- Potential HMRC computer logjam in April
- Technophobic clients
What’s not changing?
While it’s always worth keeping abreast of the changes, here’s what staying the same under RTI:
- Coding notices
- Reporting an employee records change to HMRC
- HMRC messages to employers - these will still be via EDI and DPS
- Payment dates to HMRC
- Expenses and benefits reporting
For more information, see: