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There are a series of significant forthcoming changes to the way payroll information will need to be submitted to HM Revenue and Customs (HMRC).
The new system of Real Time Information (RTI) is mandatory for all employers and is to be implemented from April 2013.
Under the current PAYE system although payroll is run weekly or monthly the details of payments and deductions made to individual employees are not submitted to HMRC until the end of the tax year. The full breakdown of payments and deductions form part of the year end forms P35 and P14 which are sent in on a tax year basis.
Under RTI employers or their agents will be required to make regular payroll submissions for each pay period during the year detailing payments and deductions made from employees each time they are paid.
Whilst the majority of payroll systems are gearing up to ensure that they are able to deal with the new compliance requirements of the RTI system, there are some important changes which will need to be made to the way you process your payroll.
The sequence of events is as follows:
The first step in the RTI process is that you will need to send employee data to HMRC which they will validate using their own databases.
Therefore, to avoid any discrepancies during the validation procedure you need to ensure that the employee information you currently hold is complete and up to date.
In particular you need to ensure that the following employee details are accurate:
Three traps to avoid in particular with regard to names:
You may wish to check the relevant information with your employees.
HMRC are planning to stagger the start dates of RTI across employers. Employers will be allocated a start date of somewhere between April 2013 and October 2013. You will receive notification from HMRC regarding your PAYE scheme’s RTI date.
Under RTI you will not be able to process pay for new employees which fail the HMRC validation checks. Therefore, please ensure the appropriate checks are carried out and the correct employee information is obtained for all new employees after April 2013.
Under RTI employers operating PAYE will have to tell HMRC about payments of earnings to all employees, even where an employee earns less than the lower earnings limit (LEL), currently £107 a week. This is a change from the current situation where employers do not have to maintain a P11 if someone for example earns £20 a month, being well below the LEL.
The payroll submission you make each pay period must be sent to HMRC before the employees have been paid. Therefore, you may wish to introduce an earlier cut-off date for your pay period after which you will be unable to make any changes for that pay period.
Please bear in mind that under RTI HMRC will be aware of the amount due on a monthly basis.
HMRC are issuing updated information on a regular basis on the new RTI system. We will keep you updated on any further announcements. Meanwhile if you would like any further information about RTI or would like to discuss the option of perhaps allowing us to deal with your payroll on your behalf then please contact Steve Vickers, Tax Partner on T: 0114 251 8850 or email: firstname.lastname@example.org.
Further details are also available on the HMRC website and can be found by visiting http://www.hmrc.gov.uk/rti/employerfaqs.htmClick here for further information about Hart Shaw’s payroll service.