PAYE changes (RTI)

PAYE changes (RTI) - Are you ready to operate your PAYE in real time (RTI)?

PAYE is changing. Employers will have to start reporting PAYE information to HMRC in real time, often referred to as Real Time information (RTI).

The majority of employers will have to submit RTI to HMRC from 6 April 2013. This will mean reporting information to HMRC online, every time they pay their employees, instead of submitting a summary form (P35/P14) at the end of the tax year.

Main changes for PAYE under RTI

All employers will send details of all payments made (or to be made) through the payroll irrespective of the amount of pay. This includes all employees paid under the Lower Earnings Limit.

There are three main changes that will happen under RTI:

  • Employers will be required to send information to HMRC about
    employees’ pay and deductions before or at the same time as they are paid
    by way of a Full Payment Submission (FPS). This information will be sent
    electronically.
  • The year end process of submitting P14s for all employees and a P35
    summary and employer declaration will no longer be required.
  • Employers will retain new starter forms P45 and P46 but will not be
    required to send them to HMRC.

Areas that won’t change for PAYE under RTI

Employers will still have to issue P60s to employees following the end of each tax year.
Benefits in kind are not included under RTI so employers will still be required to submit forms P9D, P11D and P11D(b) if applicable, following the end of each tax year. The way in which tax and NICs are calculated remains the same as do payments to HMRC.

Employer Alignment Submission (EAS)

The very first requirement under RTI is an alignment of employee details with the data held on HMRC’s NPS system. For larger employers this will be done by completing an EAS and for smaller employers a First FPS (Full Payment Submission) which will include certain key details about employees. In most cases HMRC will update their database
with the details from these submissions and will then instruct you to start submitting RTI every time employees are paid, using a FPS. Employers will be contacted directly with an instruction as to when they must do their alignment submission and in what format.

The fundamental difference between this first alignment submission (EAS or First FPS) and your regular submissions (FPS) is that you must include all details of not only active employments but also the details of any starters and leavers in the current tax year. So if you are instructed to submit an EAS in the August of 2013, you must include details
of any individuals who you have employed since 6 April 2013, regardless of whether they have since left your employ. Once the EAS has been successfully submitted, the employer is considered to have joined RTI and can start sending FPS submissions immediately.

Preparing for RTI

  • If you use payroll software, you will need to ensure it can submit RTI data. Check
    with your supplier. If you don’t use software, start planning now to get a system that will be able to submit data RTI electronically when you have to. Firms
    with nine or fewer employees can use HMRC's free Basic PAYE Tools. A new
    version will be available once you are invited to operate RTI.
  • Ensure you are registered for PAYE Online.
  • Ensure your employee data is complete and accurate. Data should include: full name, date of birth, national insurance number, gender and address. Do not guess the data if unknown as this could result in a rejected submission.
  • Include new information in your payroll records. These include: 1 ) Normal hours worked. 2) Include all employees, including lower paid, temporary or casual employees. 3) Irregular payment indicator – This needs to be set for employees who are not paid on a regular basis. (When HMRC has not received any RTI information for an employee for over 13 weeks their systems will assume that the employee has left that employment unless the irregular payment indicator has been selected.
  • If you pay your employees by BACS, you will need to include the hash cross references in your RTI submissions. Check with your BACS supplier or bureau.
  • If you use an Accountant, Bookkeeper or Payroll Provider to run your payroll, you must ensure they have all the correct information.

It is important you are ready for these changes in advance. Once you begin to operate RTI, you may incur penalties if you do not submit your PAYE data to HMRC on time.