Real Time Information (RTI) represents the biggest change to PAYE for over 60 years and from April 2013 most employers will be reporting information in real time, with all employers required to do so routinely before October 2013.
Since April of this year a number of employers have been participating in the RTI pilot on a voluntary basis which has enabled HMRC to produce guidance which can be viewed within Operating PAYE in real time. Although the guidance can only be currently used by those taking part in the pilot it is recommended that all employers look at it now if they want to see how things will work once they start to operate their own payroll in real time after April 2013. It is important to note however that this guidance may be subject to change as the pilot continues.
In this month's edition of 'Employer Bulletin' HMRC has devoted it to telling employers what they need to do to get their business ready for RTI.
Essential Facts
Under RTI, employers and pension providers, or agents and payroll bureaux acting on their behalf, will send HMRC information about tax, NIC's, student loans and other deductions each time they pay their employees. This will enable HMRC to keep more accurate records and, over time, more people should pay the correct tax.
The essential facts that employers need to know are:
- Migration to reporting PAYE information in real time is mandatory.
- Most employers will move to reporting PAYE information in real time from April 2013.
- HMRC will write to you, as an employer:
→ in October to tell you what you need to do to get ready; and
→ in February to confirm the date from which you should start reporting PAYE information
in real time.
- Information reported in real time will be sent electronically. Your payroll software will collect the necessary information and send it to HMRC online.
- You need to consider your options for payroll. Although a wide range of commercial software designed for real time reporting will be available from April 2013, HMRC's Basic PAYE Tools will also be available for employers who have 9 or fewer employees.
- You will need to include information in your RTI submissions about all employees.
- It will no longer be necessary to file end-of-year Employer Annual Return forms P35 and P14, and you won't need to send forms P45 and P46 to HMRC. Instead, this information will be included with the information reported in real time.
- Employers making payments to employees via Bacs, using their own service user number, will need to include a cross-reference in the RTI data submission and their Bacs payment instruction. You can find more information about this by visiting HMRC's Real Time Information (RTI) page.
What will not change?
- The way tax and NIC's are calculated.
- Employees will still need to be provided with forms P60.
- Forms P11D and P9D will still have to be completed and filed annually.
- Payment dates for PAYE tax and NIC's.
Key Dates for Contractors
October – November 2012
HMRC plan to write to all employers not participating in the pilot in October. It will tell employers what they need to do to get ready to make their first real time submission in April 2013.
Any PAYE schemes that HMRC believe have become redundant will be closed down during November and the employer notified in writing. If the Revenue close a scheme in error then the employer will need to contact HMRC.
Also in November, the next stage of the RTI pilot will commence, which will expand to include a large number of PAYE schemes and payroll software products.
February 2013
All employers will be issued with a follow-up letter by HMRC confirming when they are expected to start making real-time submissions.
April 2013
Real-time reporting of PAYE information begins in earnest unless HMRC agree a different date with an employer.
October 2013
Supported by information about income made available in real-time from HMRC's systems, Universal Credit will be introduced by the Department for Work and Pensions.
Payroll Software
For those using a commercial payroll software package, they will need to speak to their provider now to ensure that their software will be able to process and submit PAYE information in real time. If this is not possible, e.g. because the package is too old or the software provider has no plans to support real time reporting, then consideration will have to be given to replacing the old software with a new commercial package.
If you've developed your own payroll software, it will also need to be upgraded to collect any additional information you might need and be able to send your PAYE reports in real time.
As an alternative, those with 9 or fewer employees may wish to consider using HMRC's 'Basic PAYE Tools' package. More information about this can be found on the Download and install Basic PAYE Tools page.
HMRC's free 'Online Return and Forms – PAYE' service will not be available for making submissions in real time.
Employee Data
Before starting to send information in real time, you will need to check that the data you hold in your payroll records for your employees is complete and accurate, I.e:
- Full name;
- Date of birth;
- N.I number;
- gender; and
- address.
HMRC will then assist employers with something called 'Payroll Alignment', which is a process that all PAYE schemes will undergo as the first step of moving to reporting PAYE information in real time. The information that the Revenue hold about employees must match what's in your payroll records. To check this, in the tax year that an employer moves to RTI, they will need to supply HMRC with an extract of their records showing all individuals employed since the start of the tax year. This will include details of those who haven't been paid and those who have left your employment.
HMRC will then compare this extract to their records and, where necessary, update their records to match the information supplied by the employer.
In the majority of cases, employers will submit their employee details for 'Payroll Alignment' when they pay their employees and send in their first real time submission.
More information about 'Payroll Alignment' can be found on the 'Getting ready to operate PAYE in real time' page.
November Pilot
HMRC are still looking for volunteers to join the RTI pilot in November and those employers that do sign up will avoid having to submit forms P35 and P14 for the 2012-13 tax year. Nor will you have to complete and send forms for new starters (form P46) and leavers (form P45). To find out how to volunteer for the pilot visit the Joining the Real Time Information pilot page.
Stay Informed
As well as preparing for RTI it's important to keep yourself updated on the latest PAYE news and updates which can be found on the HMRC News page.
For those that don't want to miss anything, you can register to receive free employer e-mail alerts from HMRC by going to the HMRC Employers News page.
Specific news about RTI can be found on the Real Time Information – improving the operation of PAYE page.
Whilst most freelancers' PAYE affairs will be straightforward, with only one or two people on the payroll, RTI will nevertheless affect them and now is the time to prepare for this major change that will very soon be upon us.
Leave a Reply