Are you PAYE RTI Ready?
PAYE Real Time Information comes into effect this week on Saturday 6th April 2013.
What is Real Time Information?
HM Revenue & Customs is introducing a new way of reporting pay and deduction made under your payroll, which is called Real Time Information or RTI. This will come into effect from 6th April 2013. Reports will generally have to be sent to HMRC online each time an employee is paid. This replaces the current system under which detailed reports are only sent at the end of the year.
This will not affect the way employees are paid, but if you use BACS to pay your employees a new character code must be added. Other payment methods, such as cash, cheque or internet banking will not need this extra code.
The date payroll deductions are made remains the 22nd of each month for electronic payments and the 19th for postal payments.
Why the change?
RTI is coming into effect to support Universal credit, the new state benefit which will replace Working and Child Tax Credits and many other state benefits from October 2013 onwards. The information submitted by employers will be transferred from HMRC to computers held by the Department of Work and Pensions (DWP), so they can accurately assess the income of each benefit and top up the claimant’s income as necessary with Universal Credit.
The secondary reason will be to make sure the PAYE information HMRC holds is accurate and up to date, meaning there should be fewer under and over payments of tax at the end of the tax year.
When is my RTI start date?
The RTI pilot scheme has already started with additional employers joining between November 2012 and March 2013.
If you employ fewer than 5,001 people you will be required to use the RTI system from 6th April 2013, unless you have agreed a different start date with HMRC. Once you receive an “invitation” from HMRC to use RTI, you must join the RTI system from the date directed.
Businesses that employ over 5,000 people will join RTI on specified dates up to October 2013. HMRC will contact these employers directly to agree their “migration date”.
Which employees are affected?
An RTI Full Payment Submission report (known as an FPS) containing data for every person on the payroll in the tax year will need to be submitted. This includes all casual and occasional employees, even if they earn below the tax and national insurance thresholds.
However, workers who are aged under 16 do not have to be included in the FPS.
What do we need to do to get ready?
Instead of sending information once a year, you will need to submit information electronically to HMRC for PAYE, NIC and student loans every time you pay your employees. To prepare for the changes you will need to do the following before your RTI start date:
- Check the existing data you hold for your employees is accurate and up to date
- Familiarise yourself with RTI and how it will impact the processes you currently use
- Educate your employees on how important it is that the information they provide is accurate
What new information is required?
You will need to collect some new data items for RTI, which are not currently required, such as:
- Hours Worked – The DWP will need to know approximately how many hours an employee works. This means you need to select one of the following weekly bands:
- Up to 15.99 hours
- 16 – 29.99 hours
- 30 hours or more
- Other – To be used for employees who receive a pension and do not work any hours
- Partners name – Only required if the employee wishes to make a claim for additional statutory maternity pay (ASPP)
- Passport number – To be collect as part of your checks to ensure a person is entitled to work in the UK.
- Casual workers – Payments made in cash to staff i.e. crop pickers or bar staff.
- Ad-hoc payments – Payments made outside the normal payroll run, i.e. an overtime payment has been missed.
- Benefits and expenses – This will include payments to an employee’s private bills
- Notional payments – Where there is no transfer of money to the employee
What are the new terms for RTI?
EAS – Employer Alignment Submission is a one off submission that HMRC will use to match and align your company and employee records against the data they hold. Only large employers who employ more than 250 employees will need to submit an EAS, SME’s can volunteer to submit if they wish.
FPS – Full Payment Submissions is the main and most common submission type consisting of the employee payments and deductions. Every time you make a payment to an employee the submission must be made on or before the date the employee is paid, regardless if this is weekly or monthly.
EPS – Employer Payment Submission is only submitted when you need to advise HMRC of any alterations to your PAYE and NIC liabilities. You should make this submission when or before the relevant monthly or quarterly liability payment to HMRC is made.
What are the penalties for not doing this?
Once RTI is bedded in, penalties will apply automatically for late submission of the FPS and for incorrect reports, if these errors are picked up during an HMRC inspection.
However, these RTI penalties are unlikely to apply before April 2014, but this has not been clarified as yet.
What will Leonherman do?
This document highlights some of the forthcoming changes to PAYE reporting under RTI. Our payroll team will be in touch throughout February asking you to complete the following forms:
- Form 64-8 – This is to allow us to receive coding notices direct from HMRC
- Form FBI 2 – Authorising us to file information online to HMRC.
- Employee RTI information form – To ensure we have up to date information for each employee before RTI starts
If you want to discuss how your business will be affected more specifically,
please contact us 0161 249 5040 or firstname.lastname@example.org