What RTI Actually Means for Contractors

As Spring edges ever closer, so too does April’s introduction of Real Time Information (RTI for short).

A new scheme by HMRC, it aims to modernise how tax and National Insurance information is submitted, and requires all companies operating a PAYE scheme to send HMRC the relevant information “on or before” every payday. 

Quite a change. So much so, it’s been dubbed “as the biggest change to PAYE since the introduction of the system in 1944”.

With acclamations like that, the results of a survey we conducted recently makes for worrying reading. According to the findings, a mere 19% of small businesses are aware of the upcoming changes, with more than double that amount (46%) reporting that they “have no knowledge” of RTI. Around a third, meanwhile, claim to have a “vague” awareness.

What then, will RTI actually mean for contractors, and what can they do to comply?

The first thing to note is that this legislation will only affect limited company contractors. If you’re a sole trader with no employees then you needn’t worry. If you operate a limited company though, every time you draw a salary you must notify HMRC, either through a piece of compliant payroll software or by using HMRC’s Basic PAYE tools.

If you’ve got an accountant the ball should be in their court for this one, although you should check that RTI processing and reporting is included in their services. They should carry the compliant payroll software and submit all the relevant information on your behalf. As a recent study by the IRIS illustrated though, bear in mind that you might face rising fees as a result of their increased legwork.

In contrast, any contractors without an accountant will need to use their own bookkeeping software and manage submissions on their own, using HMRC's Basic PAYE tools to notify the taxman.

The introduction of the scheme has proven controversial, parliamentary figures voicing concerns that it might be a case of too much, too soon. Ultimately only time will tell, but aware of the significant upheaval, HMRC have delayed their RTI-related penalties by a year. So don’t fret too much about the threat of fines.

Despite the bad press, once the dust has settled RTI should in fact be beneficial for contractors, with P35s and P14s rendered obsolete. The introduction has undoubtedly been badly managed, but once up and running, it’s something that should make PAYE easier.

This article was contributed by Mark James, an in-house Writer for online accountants Crunch. He specialises in finance and small business.

1 Comment

  • mrmss says:

    I would challenge my accountant if he tries to increase his fee for the ‘extra legwork’ if it means less legwork with P35 and P14 becoming obsolete and PAYE ultimately becoming easier.

Leave a Reply

Your email address will not be published.

★ ★ ★ ★ ★

Very pleasant. Excellent price for what I needed. I will be a returning customer.

Rhino Review

Mr Paul D

Great staff. Customer focused and a team who recognise and understand their customers 100%.

Rhino Review

Vijay S

Fantastic accountants who helped me submit my last 2 years personal tax returns! I really rate this company!!!

QAccounting Review

Natalie

Fantastic service.

Rhino Review

Marco G

Been with QAccounting for several months now, very good service, very personal and the best prices I have seen.

QAccounting Review

Muhammed A

I switched over to QAccounting a few months ago and haven't looked back. I get to speak to my own client manager and accountant, the prices were the best I had seen, and I paid exactly what it said online (no extra costs). Very happy with QA.

QAccounting Review

Jeremy H