Real Time Information – major changes ahead for payroll

By Gordon D’Silva – Chartered Accountant in Wimbledon, SW19 and London and Croydon

We are writing to advise you of significant 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 for the majority of employers from April 2013. (This is dangerous)

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. I suspect charges will be impacted too.

The sequence of events is as follows:

Data Validation

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:

• Full employee name
• Date of Birth
• National Insurance Number
• Full postal address.

Three traps to avoid in particular with regard to names:

• Don’t use ‘known’ names for example Bill or Will instead of William, Sue instead of Susan, Bob instead of Robert.
• Don’t use initials in the forename or surname fields.
• Don’t split double-barrelled names over forename and surname fields. So if Jean-Paul is a double-barrelled forename for example, then this all goes in Forename field. If Smith-Jones is a double-barrelled surname for example, then this all goes in the Surname field.

You may wish to check the relevant information with your employees.

HMRC notification and implementation dates

The latest HMRC guidance advises that the majority of employers will start reporting using RTI from April 2013 and that all employers will be reporting using RTI by October 2013. You will receive notification from HMRC regarding your PAYE scheme’s RTI date. Please send it to us immediately on receipt, like all official documents.

New employee details

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.

Casuals

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 (deductions working sheet) if someone for example earns £20 a month, being well below the LEL.

HMRC have issued further draft regulations and guidance to deal with some specific areas. These rules include a relaxation of the requirements in respect of the reporting of some payments made to casuals and where a P11 does not have to be maintained. HMRC propose that employers will be allowed up to seven days to report these payments.

You will still need a p46 for casuals like you do now.

Payroll processing

The payroll submission you make each pay period must generally 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.

Payments to HMRC

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 me.

Further details are also available on the HMRC website and can be found by visiting http://www.hmrc.gov.uk/rti/index.htm

If you are interested in knowing more aboutour great FREE webinars then please call us on 0208 241 3000 or email us at gds@gordonsknight.co.uk

We are accountants in LOndon, Wimbledon and Croydon. WE specialise in Tax.