Real Time Information is the new system for reporting PAYE and NI liabilities to HMRC. It replaces the old year-end system where the total amounts for the year were reported on P14s and P35s. Instead, under RTI a separate report needs to be made every time a payment made.
The payment dates are unaffected – regardless of the number of returns made for a month, the tax and NI for that month is still payable on the 19th of the month on payments made to the 5th of the month.
The major aspects of the new regime are set out below, but as ever with HMRC these days there are many detailed rules. Please see our more detailed user guide here for more information.
If you have any questions, or if you would like us to talk through your particular situation to identify any potential pitfalls, please give us a call.
Getting ready for RTI
RTI will apply to almost all employers from April 2013. You can opt in early, but very few people will be able to delay joining.
There are three major differences with RTI compared to the old system:
- Everything is on-line
- You need to report more often
- You need to report more data
So to be ready for it, you need to:
- Make sure your software works
- Think about your payroll procedures
- Collect all the information you’ll need
If you use payroll software already, the developer should have updated it to work with RTI. If you do payroll manually you’ll need to either get some software or else find an agent to file for you. HMRC have produced a basic set of software, but it only works for up to 9 employees.
You also need to be registered for Payroll Online (through the Government Gateway) to file RTI returns.
2) Payroll procedures
In theory RTI should have no effect on your procedures, as all you have to do is report payments before they happen.
There are specific procedures to be adopted when you have casual or cash wages paid at the end of a shift (such as in a restaurant). There are also ‘non-cash’ payments to report such as share options.
Returns generally have three parts:
- Information about the employer
- Information about the employee
- Information about the payment made
The main thing to be aware of at this stage is the employee information. You need to have complete and accurate and ‘validated’ information about the employee, so you can include it in the returns and HMRC can unambiguously match them up with their records.
The first return needs to include all the employee information so that HMRC can validate it against their records. For most people this will be done as part of the first payment submission, but if you have multiple payrolls or more than 250 employees then HMRC may require you to do a separate data validation submission.
The Full Payment Summary (FPS)covers matters to do with individual employees: mostly payments, but also updates to data, and correction of errors. You need to submit one every time you pay one or more employees; you can submit error correction ones any time.
The Employer Payment Summary (EPS)covers matters which relate only to the employer as a whole, such as reclaiming SMP or CIS deductions. These only need to be done monthly, by the 19th of the month after the one they relate to. You need to do a separate EPS for each matter, so if you have both SMP and SSP to reclaim you need to submit two returns.
The very last return you submit in a year has to have some additional details in, mostly flagging up events that occurred during the year. The most typical matter to report will be that you paid expenses or benefits, and so P11Ds will be submitted in due course.
Employers need to keep written records of the information gathered from new employees. HMRC form RTI46 sets it all out, or you can use your own form.
The main thing is to identify other payrolls that the employee is (or has been) on in this tax year. This allows the right tax code to be operated from the start.
Generally, if employee data is wrong you need to call HMRC’s Employer Helpline.
If you get the figures wrong on an FPS you need to either submit a new FPS showing the difference, or you may be able to just update the year to date figures on the next one.
Changes in an employee’s name or address need to be reported to HMRC by the employee as soon as possible: the employer cannot change HMRC’s records. This is best done on-line at the HMRC website.
An outline of the proposed penalty regime is set out in our guidance notes, but the final rules are not yet finalised.
Expenses and benefits are still reported on P11Ds. All you need to do in RTI is flag that you’re paying them.
P45s are still to be issued, but only to the employee for their records and to pass to the new employer to confirm the information they need to bring the employee onto the payroll.There’s no need to send a P45 to HMRC, as the information is all in the relevant FPS.