In April 2013, HM Revenue & Customs (HMRC) is introducing a new way of reporting PAYE, called Real Time Information, or RTI.
Using RTI, employers and pension providers will tell HMRC about PAYE payments at the time they are made as part of their payroll process. Payroll software will collect the necessary information and send it to HMRC Online. Information about PAYE payments will be submitted throughout the year as part of the ongoing payroll process, rather than at the end of the year, as happens now. RTI will only affect the submission of PAYE information - payment arrangements will remain unchanged.
Most employers will be legally required to use RTI from April 2013 with all employers submitting RTI by October 2013. HMRC will tell them when their business needs to make this move.
HMRC has already begun, in April 2012, with a pilot test of the new RTI system, which if successful should ensure that people pay the right amount of tax first time, with far fewer taxpayers being hit with demands for extra tax months or years after they thought they had paid the right amount. The first of ten employers in the pilot scheme recently submitted their RTI returns for the first time.
The RTI submissions system will use the PAYE information that employers already send to HMRC, but they will need to ensure that the payroll data is correct and in the right format for RTI purposes.
Payroll software may need updating so that it can process and submit RTI data and if your business does not currently use payroll software, you will need to plan ahead now so that your business will be able to submit data RTI to HMRC electronically when required to do so.
Businesses that have nine or fewer employees can use HMRC's free Basic PAYE Tools and there will be a new version available to download when you are invited to operate PAYE in real time. Some commercial payroll software providers also provide free products for employers with nine or fewer employees.
If your business uses the services of a payroll bureau, bookkeeper and/or agent you should discuss how RTI will affect your business and the changes you will need to make to your PAYE processes as soon as possible.
Once you begin to operate RTI, if you do not submit your PAYE data to HMRC on time you may incur penalties. If you pay your employees by direct Bacs you will need to include the hash cross references in your RTI submissions.
HMRC will continue to work closely with employers, pension providers, payroll providers and the software and banking industries over the coming months and throughout the pilot to ensure that the move to the RTI system is as smooth as possible. If you are an employer, agent or payroll bureau and would like to volunteer to take part in further piloting from November 2012, please speak with your payroll software developer.