Following favourable responses to HMRC’s Real Time Information (RTI) concept that was revealed in a discussion paper issued in July, a consultation document has recently been published entitled, ‘Improving the operation of PAYE: Collecting Real Time Information’.
PAYE RTI means that employers will send HMRC information about tax and other deductions from employees’ pay when the employee is paid, rather than at the end of the year. It is envisaged that RTI will mean that:
Annual employer returns can be dispensed with;
HMRC will use the RTI to update records when a taxpayer changes employer thereby removing the need for employers to separately send forms P45 or P46;
HMRC will have the RTI needed to support the Government’s welfare reform agenda;
HMRC will be able to help prevent and detect errors and fraud within the welfare and PAYE systems;
HMRC will not need to wait until the year end to identify underpayments by employers and collect that tax; and
In some circumstances, HMRC will be able to adjust employees’ tax codes in year to reflect their changing income and therefore, over time, reduce the need to send employees repayments or bills after the end of the year.
Benefits-in-kind are not included in the proposals, so employers will still be required to submit forms P9D, P11D and P11D(b) at the end of the year.
It has been decided to phase in the introduction of RTI beginning in 2012 with the suggested timetable being as follows:
April – October 2012; Test system with a small number of volunteer PAYE schemes (large, medium and small employers).
October 2012 – January 2013; Adjust the system to reflect lessons from the testing to migrate a further group of volunteers.
From January 2013; Large employers mandatory use of RTI.
From April 2013; Medium sized employers mandatory use of RTI.
From August 2013; Small employers mandatory use of RTI.
October 2013; Programme complete.
Closing date for comments on the consultation document is 28th February 2011.