HM Revenue & Custom’s (HMRC) Real Time Information legislation (RTI) will start to be introduced from April 2013 and will become mandatory for all employers by April 2014. How can you prepare for it?
Key preparation should be making sure you have all the correct details for every employee and checking them against official sources. It’s a good idea to familiarise yourself with the process by which detailed information can be found on the HMRC website. Why is it important to make sure payroll data is accurate?
Because you will be submitting information more often and with tighter deadlines under RTI, the temptation is there to create shortcuts, especially for new employees. However, it’s essential that you send the right information. Without it, HMRC may not be able to match your data to its records and this may trigger a duplicate or inaccurate records. Employees may pay the wrong amount of income tax or National Insurance contributions, be over or underpaid and may have problems accessing state benefits or their state pension. In addition, being accurate will save you money by reducing the amount of employee contact and number of HMRC compliance checks you receive.
The key information HMRC needs employers to get right is the employee’s name, date of birth and National Insurance number. HMRC says more than 80% of data quality problems are caused by not getting that basic information right.
How will RTI change some of your payroll processes? Because you will be required to submit data on or before payroll, this will mean a simplified Payroll Year End procedure, and it will also affect some normal payroll processes, such as taking on new starters and making employees leavers. For example, employers will no longer have to complete a P46 form when taking on a new employee who doesn’t have a P45, but you will need to obtain the P46 information and complete starter information for the employee’s first payment.
From April 2013, end of year return forms (P35 and P14) or P38A supplementary returns will no longer be needed because you are informing HMRC about all payments made during a tax year every payroll. Under RTI you will submit online a Full Payment Submission, which will detail tax, NICs and other deductions when or before the payment is made to the employee.
Want further advice on RTI? Visit sage.co.uk/rti for more information
• After this blog was published, HMRC announced a "relaxation of reporting arrangements for small businesses". According to HMRC: "Until 5 October 2013, employers with fewer than 50 employees, who find it difficult to report every payment to employees at the time of payment, may send information to HMRC by the date of their regular payroll run but no later than the end of the tax month (5th)."