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Payroll Changes

Real Time Information (RTI)

As you may be aware HMRC are introducing major changes in the way PAYE information is reported to them. The Real Time Information procedures mark the biggest change in the Payroll and PAYE system since the commencement of PAYE nearly 70 years ago.

Under RTI, employers and pension providers are required to provide detailed information to HMRC in respect of more or less all wages/salaries on or before each payment date, instead of after the end of the tax year. This system of Real Time reporting is designed to ensure that HMRC has both up to date and accurate details of employment income and tax deductions for all PAYE taxpayers, thereby reducing the number of end of tax year reconciliations with resultant underpayments and repayments.

RTI reporting will become an integral part of an employer’s normal payroll activity every time wages/salaries are paid and will also provide the Department of Work & Pensions with up to date information regarding claimants’ employment income, enabling calculations of Universal Tax Credit payments to be made on a monthly basis without the need for further information submissions by individual claimants.

Although the new scheme will dramatically change the PAYE system there are still some aspects that will remain the same, in particular employers will still use codes to determine the amount of tax to be deducted from employees, P60s, P45s and P11Ds will continue to be used and PAYE/NI deductions will still be due to HMRC by the 19th/22nd (depending upon the payment method used) of the following month.  However with RTI HMRC will be in a much better position to pursue unpaid deductions and impose penalties in respect of late payments.


Preparing for RTI

 RTI will be compulsory for all entities operating a PAYE system and employers should start preparing for its implementation now in order to ensure they are ready for RTI commencement (for most employers 6 April 2013) and help to avoid any penalties imposed as a result of failing to comply with the new system.

Separate pieces of information reported to HMRC are known as ‘data items’. Under RTI there will be major changes to the data items required to be reported. In total there are over 150 potential individual data items that could be required ranging from basic items such as name, date of birth, gross pay, etc through to more unusual items, notably passport numbers for certain workers, banding of contracted hours for all employees, tax free payments and payments made to casual workers.  Full details of operating PAYE in real time are available via www.hmrc.gov.uk/payerti/index.htm.  For details on data items select “What to Report” from the options.


 Employee Data 

As part of the process for an employer joining RTI, HMRC will align the records of employees held on their National Insurance and PAYE system with the records held by each employer through an Employer Alignment Process.

Employer alignment is an important process that all employers will need to undergo as part of the joining process for RTI.  Alignment will ensure that the employer and HMRC both hold consistent information in respect of employees in every PAYE scheme before reporting using RTI begins.  It is therefore important that correct and complete details are held in respect of full employee names, dates of birth, addresses, NI numbers and gender.  Where, for instance, NI numbers are not known or not issued, e.g. to those under 16, the data must be left blank and temporary, dummy, default information must not be used.  It is recommended that employers gather together all the relevant information and then ask each employee to check their own respective data.  Where there is incorrect data held by HMRC then the employee will have to contact HMRC (except in the case of an NI number error which can be dealt with by the employer) to have the error corrected.

For large PAYE schemes an ‘Employee Alignment Submission’ is required. For small schemes the alignment process will be conducted based on their First Payment Submission. An alignment submission can only be made once and amendments cannot be made once submitted. This process is designed to make it easier for employers to submit information to HMRC once RTI is fully implemented.


Commencement Date

Most employers and Pension providers will begin to use the RTI service in April 2013 (although not necessarily April 6!) with almost all employers using the new system by October 2013 and a few specialist payrolls joining in April 2014. Once the new system commences a return of all employee payments must be made on or before each payment date (except in very limited circumstances, e.g. daily paid agricultural workers in respect of which data must still be submitted within the subsequent seven days) where any employee is paid more than the Lower Earnings Limit (and this return must include payments made to employees both above and below the Lower Earnings Limit although note that in respect of the latter under 16s, e.g. newspaper boys/girls can be excluded if so desired).

If you need any further information in respect of any of the above then please do not hesitate to contact us.


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