Due to start April 2013

Many employers may not be aware that HMRC are introducing a new way of reporting PAYE and NIC payments. HMRC hopes that Real Time Information (RTI) will improve the operation of the PAYE system by creating more up-to-date taxpayer records and making it easier for HMRC and employers to administer. The fundamentals of PAYE will remain the same, but employers and pension providers will send PAYE information to HMRC each time they pay their employees, rather than after the end of the tax year. HMRC hopes that this will mean that more employees will be paying the right amount of tax and National Insurance.

One important advantage of RTI for HMRC will be that HMRC will be aware each month of how much PAYE and NIC is due from employers and will able to quickly identify employers who are not paying over the correct amount. Delaying payment of PAYE and NIC due to HMRC has been a useful source of short term finance for many businesses but once RTI has come into force businesses will have to find other means of finance.

A further reason for introducing RTI is that it will provide HMRC with up-to-date information about employment and pension income so that the Department of Work and Pensions can adjust claimant’s Universal Credits, which are due to start from 2013.

A pilot project is already underway and further employers are joining the pilot. It is intended that most employers will join RTI from April 2013 and for all employers and pension providers to be routinely reporting in real time by October 2013.

After April 2013 it will no longer be necessary to complete end-of-the-year returns P35 and P14. There will also be changes in the way forms P45 and P46 are dealt with. P60s will still be issued at the end of the tax year. Payroll providers will be amending their software to deal with the new processes. HMRC will also be making available free PAYE Basic Tools for employers with nine or fewer employees.

• You should speak to your payroll provider to ensure that they will have the systems in place by April 2013 to enable you to comply with the IT requirements of RTI. This should cover not just routine payroll processes but also non-standard payments such as termination payments and share options. There will also be some additional reporting requirements, including normal hours worked and the value of non-taxable payments made at the same time as the earnings payment.
• Staff involved in the payroll process will need suitable training.
• You should also review your HR, finance, reward and payroll processes to ensure that information for new staff is accurately captured and that PAYE and NIC payments are budgeted for at the right times.
• Payroll databases will have to be cleansed to ensure that all current employee data is complete and up to date.

For all employees who have been on the payroll since 6 April 2012, even if they are below the tax threshold, you must have the following information:

• Surname
• Forenames
• Gender
• Address
• Date of birth
• National insurance number

Failure to have full correct information could mean that your employees do not receive full entitlement to the Universal Credit.

Inevitably some management time will be required as it is a significant change. However, Henderson Loggie can help you to reduce the time you have to spend getting ready for RTI by:

• Providing payroll bureau services for your business
• Reviewing your payroll process to ensure that it will meet the requirements of RTI
• Providing training for your staff
• Assisting you to cleanse your payroll data

Edinburgh office: Margaret Cuthbert

margaret.cuthbert@hendersonloggie.co.uk

0131 226 0200

Glasgow Office: Shona Gracie and Belinda Porteous

shona.gracie@hendersonloggie.co.uk

belinda.porteous@hendersonloggie.co.uk

0141 221 6807

Dundee and Aberdeen offices: Hazel Pratt

hazel.pratt@hendersonloggie.co.uk

01382 201234

Sage payroll software enquiries: Iain Craig

iain.craig@hendersonloggie.co.uk

01382 201234

www.hendersonloggie.co.uk