Real Time Information – what does it mean for your business?
Leading South West accountancy firm, Albert Goodman, is taking part in the HM Revenue & Customs (HMRC) pilot of Real Time Information (RTI).
From this experience the firm will gain knowledge and practical experience of the changes needed to operate RTI efficiently and effectively.
Julie Hopkins from Albert Goodman discusses the changes that are on the way and how businesses can prepare.
Real Time Information (RTI) is a compulsory HMRC programme to improve the operation of Pay As You Earn (PAYE) for both employers and employees and supports the introduction of Universal Credit by the Department for Work and Pensions (DWP).
What will RTI mean for employers?
All employers will need to inform HMRC of pay and deductions every time employees are paid – by way of a ‘Full Payment Submission’ (FPS), on or before the date employees are actually paid.
There are changes to how HMRC is advised of starters and leavers and changes to businesses’ internal procedures are likely to be required.
Employees must still receive a P60 but there will be no year end reporting to HMRC – the final FPS of the year will provide the whole year information.
There are no changes to the calculation of tax and National Insurance (NI) as a result of RTI – it is a change in the method and frequency of reporting pay and deductions to HMRC.
When will employers need to be ready for RTI?
RTI will be introduced for all existing employers from April 2013. Each employer will receive a letter from HMRC with their ‘on-boarding’ date – the date from which the new system must be used.
It is not possible to join before the ‘on-boarding’ date (unless taking part in the pilot). Currently HMRC expect employers to have ‘on-board’ dates between April and October 2013.
What actions are required to be ready for RTI?
If a business has ten or more employees, it will need to have RTI compliant software or a payroll service, such as Albert Goodman Payroll. Not all payroll software is compliant at the moment and it is worth the employer checking with their provider.
If a business has nine or fewer employees, it can use free software provided by HMRC although those businesses may decide use of a payroll service is still helpful.
At the ‘on-board’ date, each employer completes a ‘Payroll Alignment’ submission. Having complete and accurate data in payroll records is important for this process. As well as confirming existing payroll data – such as full names, dates of birth, NI numbers, gender and addresses –normal working hours will also need to be included.
One change for some businesses is that employees earning less than the Lower Earnings Limit for NI now need to be included on the payroll.
For employees who leave after 6 April 2013 but before the ‘on-board’ date, the business will be required to provide all of this information as part of the first FPS. The first FPS after joining RTI will need to include full information for all employees who have been paid after 6 April 2013, even if they are no longer employed at the date of joining.
In practice this means full information will need to be maintained from 6 April 2013