By Lyndsey Hall
RTI, or Real Time Information, is a new method of PAYE (Pay As You Earn), which will involve employers filing information online every time they pay employees. This new process will replace the old one of reconciling payments made throughout the year and submitting them annually on the traditional P14 and P35 year-end forms. There are numerous new RTI-ready software packages available to help businesses cope with the new system, and the HMRC have a handy list of recognised products to help you choose the one that’s right for your business. The new method is being rolled out to businesses on April 6th 2013, and will eventually become mandatory for all businesses in October 2013. When a small business completes its first payroll run using RTI, this initial FPS (full payment submission) will update the HMRC with employee details; just make sure to include employees’ full names, exact dates of birth and correct National Insurance numbers, otherwise the submission may be rejected.
Over the next few weeks before the new scheme is rolled out, SMEs will need to take a few steps to prepare themselves for RTI, as advised by AccountingWeb in an article entitled RTI for practitioners: What you need to know:
- Directors who take most of their income as dividends can continue to pay themselves below the lower earnings limit (LEL) and, therefore, avoid having to operate a PAYE scheme. However, if any employee is paid above the LEL, then the payment details of all company employees (including directors, if they have contracts of employment), have to be included in RTI submissions. There are flags in the new software that will allow you to identify those who are paid infrequently, so use this for any directors in this situation, as filing three consecutive monthly nil returns could see them disappear from HMRC’s employee list.
- You won’t need to submit any joiner or leaver information for a new starter tax code, as the RTI submission itself covers everyone being paid by the employer. However, you will still have to issue a P45 to a leaver to take to their new employer so that they can correctly pick up their PAYE code and gross pay and tax to date.
- If you are filing CIS300s, continue to do so. HMRC will use the information to match the amounts offset within the employer’s payment summary (EPS), which should arrive at total liability.
For a more detailed guide to implementing RTI in your business, check out AccountingWeb’s Expert Guide: the nuts and bolts of RTI.
One of the reasons that the Revenue is making RTI obligatory for all businesses as of October, is because it is necessary for the successful implementation of Universal Credits, which is scheduled for autumn 2013. Universal Credits is a new single monthly payment for people in work or out of work, and will eventually replace the current tax credits system.
However, there is some good news. The following processes are not changing under RTI:
- Coding notices
- Reporting an employee records change to HMRC
- HMRC messages to employers – these will still be via EDI and DPS
- Payment dates to HMRC
- Expenses and benefits reporting
If your business is not yet RTI-ready and you need some specific advice, give us a call and we will be happy to help in any way we can. If you think there is anything we have missed, or you have an opinion on the new RTI scheme, let us know in the Comments!