PAYE was introduced to help provide funds to pay for the Second World War. Real Time Information (RTI), which applies from 6 April 2013, is the most significant change since its introduction.
It is aimed to make the PAYE system more responsive and up to date, hopefully avoiding late tax demands publicised in the press over the last 18 months.
If we already complete your payroll for you there is nothing for you to do, because we will handle all the RTI complications as part of our current service package for you.
If you handle your payroll in house, read on for more information about RTI.
When will RTI apply to your business?
RTI will become a reality for all owner-managed businesses from April 2013. Only very large businesses will join RTI at the second stage during October 2013.
You will receive an ‘invitation to board’ RTI directly from Inland Revenue. This letter will contain the date of your first RTI submission for your PAYE scheme. You must be ready for the changeover to the new system.
What will RTI mean for your business?
Under RTI, employers must report pay and deductions details electronically to HMRC at or before a salary payment is made to an employee or director.
You will need RTI-compatible payroll software to handle these transactions. For most employers this will just mean upgrading their current system. We are SAGE dealers and can supply you with the upgrade to this product if you are not using an RTI-compliant version.
This may be a good time to review your payroll function. If you currently deal with the payroll internally, is this the time to outsource your PAYE? Is the person running your payroll fully aware of the new PAYE procedures? Please let us know if we can help.
Very small employers with nine employees or less can use the Revenue’s free PAYE software. The link is: www.hmrc.gov.uk/payerti/payroll/bpt/index.htm
Existing employers should already be registered for PAYE online because of the requirement to file annual P35s, but new employers will need to register. See: www.hmrc.gov.uk/payerti/getting-started/using-paye-online.htm.
How do I make the system work?
RTI will only work if the details held by the Inland Revenue for every employee match the details you hold.
Every business must undergo a PAYE alignment process at or before their first RTI submission. You must do this for every PAYE scheme you have.
This process makes sure that the payment and deduction information filed with the Revenue is matched to the correct employee’s tax record.
You must make sure there are no gaps in the employee data before commencing the alignment process.
For all the details you must have for all employees before starting the alignment process, see: www.hmrc.gov.uk/rti/dip/get-payroll-right.htm.
How do I start the alignment process?
You can do the alignment process in one of two ways:
- A separate submission (known as an employer alignment submission (EAS)
- As part of the first full payment submission (FPS)
Employers with more than 250 employees must send a separate EAS. Smaller employers can choose the method most suitable for them. I think it is best for everyone to carry out an EAS so that you can sort out any problems beforehand.
An EAS should be filed as soon as possible after you have received the ‘invitation to board’.
It is important that no employees are overlooked as HMRC will assume that any employee who is not included within payroll alignment has left the organisation and will close down their employee record.
Where payroll alignment is undertaken by means of an EAS, the employer will need to include details of payments and deductions in an FPS.
An FPS should include details of all employees paid in the period, employees who have left since the EAS was submitted, and details of employees who have been paid in the tax year but who will not be paid within the first month.
Further details can be found at: www.hmrc.gov.uk/payerti/reporting/payroll-alignment.htm
How do I handle my first RTI filing?
In practice, RTI is unlikely to be as on onerous as it sounds, as ‘send information to HMRC’ will become just another stage in the payroll process handled by your payroll software.
Pay and deductions details are filed with the Revenue as part of the Full Payment Submission (FPS). Details of starters and leavers are also reported to HMRC by means of the FPS, removing the need to file forms P45 and P46 online.
You will still need to complete these forms under RTI. You must still give a leaver a P45 and you will still need to complete a P46 for any joiner without a P45.
The Revenue checklist on the details to include on an FPS is here: www.hmrc.gov.uk/payerti/getting-started/payroll-summaries/fps.htm
What are the changes to PAYE end of year process?
Forms P35 and P14 are abolished under RTI but you will still need to give each employee a P60.
You indicate in your last FPS for the tax year that this is the final submission.
Are there any other forms to file?
In some special circumstances, you may need to file an Employment Payment Submission (EPS). For more details, see: www.hmrc.gov.uk/payerti/getting-started/payroll-summaries/eps.htm
What about reporting expenses and benefits in kind?
There are no changes to reporting benefits in kind; the system of completing P11ds, P11d (b)s and P46 (car) continues as at present.
Are there any changes to the payments I make to the Revenue for PAYE?
No, payments of PAYE are unchanged. The payment office will become Cumbernauld and not Bradford.
Do you need help?
RTI is not optional. Incorrect returns may give rise to penalties but the Revenue will not be charging them in the early years to RTI. See: http://www.hmrc.gov.uk/news/payerti-payments.htm
Please ask us if you need help.