RTI (Real Time Information) represents the biggest change for payroll since the introduction of Pay As You Earn (PAYE) in 1944. It affects any business operating a PAYE system for its employees and/or directors
What is RTI?
RTI is a move away from notifying HMRC about the payments the employer has made through a year-end return, to regular online submissions as each pay period is paid. It is essentially replacing the stressful year-end P35 submission in April/May with a submission on or before you pay your employees for a given period (whether daily, weekly, fortnightly, four-weekly, monthly, quarterly, half-yearly or annually).
RTI is designed to make the PAYE process simpler for everyone – as well as being faster and more accurate, it should reduce the number of coding notice errors and allow HMRC to chase late payments more effectively. RTI is also being introduced in parallel with the government’s flagship policy, the new single welfare payment Universal Credit. The plan is to have both fully operational from October 2013.
Four steps to prepare for RTI
Don’t panic, just start preparing your business now. The majority of businesses will need to start reporting under RTI from April 2013. HMRC will move larger companies onto RTI between May-September 2013. It is recommended that the required changes to payroll processes and procedure, including assessing current and/or introducing new payroll software, be implemented as soon as possible.
Check if you can accommodate RTI in your existing payroll procedures. You need to establish how easy it will be to slot RTI into your current payroll solution. This is where an “RTI Ready” payroll system like Gillespie’s will make it really easy.
Check employee details are accurate. It is really important records match up with those held by HMRC as information will be submitted much more frequently. Our RTI data check will detect all possible discrepancies for you.
RTI payroll data must now be sent to HMRC electronically. It is no longer possible for businesses to manually enter the data into the HMRC website. Gillespie’s payroll software and our support team will help you through this process, identify any issues quickly and fix them.
National insurance number verification
As part of the Payroll Alignment process, HMRC will be offering a new NINO verification service, where HMRC will confirm which national insurance number should be used for a particular individual.
Very little new data is actually being introduced as a result of RTI. Most of the data formed is already a requirement for in year submissions and tax year end, but new data fields have been added. They are:
NEW DATA FIELDS:
Contracted hours This is the number of contracted hours only. You will not need to update this each pay run based on actual hours worked.
Passport number This will be required for new joiners, and is a sensible identity check for employers to confirm the joiner’s date of birth and that they are entitled to work in the UK. There is no requirement to collect passport numbers for existing employees.
Irregular Payment Indicators As a general policy HMRC closes employee records after week 13 of non-payment on FPS and treat them as if they have left work. However, if a subsequent FPS with payment values is presented, then HMRC re-opens the record as if the employee never left. To stop HMRC getting in contact with individuals as if they had left employment, a new optional Irregular Payment Indicator is introduced to allow employers to show to HMRC when an employee is not going to be paid for a period of 13 weeks or more./li>
Non-compliance is not an option
The impact on employers not aware of the implications could be severe, RTI is mandatory. There has been no confirmed value of fines, although HMRC have proposed £100 each time you fail to update details in real time (source: http//www.professionalpensions.com), but they will not be implemented before August 2013.
In addition to the suggestion of a £100 fine, HMRC introduced the idea of fines only being issued on a quarterly basis, or once a set limit has been reached. Proposals also include the creation of banding, which would see employers being charged to specific numbers of defaults; for instance, between one and 99 faults being fined a set amount and errors between 100 and 199 being fined another amount.
Not only will HMRC impose penalties for failure to comply, but if you get it wrong then employees could be taxed the wrong amount and be underpaid or overpaid throughout the year. Even those businesses aware of RTI, and how close it is to being implemented, may not appreciate the full implications and the extent to which RTI will affect their processes and procedure. So far, HMRC has identified over 100 potential pieces of information to be transmitted under RTI.