Next year, employers will be required to submit payroll data to HMRC via a new system, with more information and potentially more work required. Ken Davies explains what the changes are likely to mean
From April 2013, a phased introduction of RTI (Real Time Information) will see employers submitting payroll data to HMRC via the Government Gateway on or before payments are credited to employee's bank accounts. These new measures could greatly increase the workload for employers.
By October 2013, all employers will have to submit under RTI. However, HMRC will roll out RTI by issuing employers with directives to commence submitting RTI returns from as early as April 2013.
The current system allows employers to issue PAYE information to HMRC at the Payroll Year End using electronic versions of the traditional forms P35 and P60. The new RTI system will require firms to send payroll data to HMRC via the Government Gateway on or before the date each employee is paid.
The payroll data will include all employee personal information, details of their pay, tax, national insurance and net pay for that pay date together with additional information such as the number of hours an employee typically works.
There is a lot of merit in what is trying to be achieved by HMRC but there appears to be a disproportionate level of responsibility being placed on employers in a short space of time.
For instance, how readily will businesses adapt to RTI? How efficiently will their software cope with the changes? How will mistakes be corrected? What if you have a "split" payroll? What if there are multiple pay points in a payment period?
Some of these changes will be challenging for employers and they may need a helping hand in being shown how to submit under RTI or import a payment file from their software, rather than keying in individual amounts as they are used to.
Assuming your payroll software will be capable of supporting your needs for RTI, and you are confident with processing payment files generated by your payroll software, then you will need to keep an eye out for your "On Boarding Date" issued by HMRC.
The On Boarding Date will be when you are required to file your first submission under RTI, including data to allow HMRC to align their in-year and personal data to yours.
The advent of RTI will do away with separate processes for starters and Employer Annual Return Forms P35/P14. Leavers will continue to be issued leaver statements but HMRC will give greater freedom on how this can be provided. For example, a final payslip might suffice, but it is envisaged that most employers will continue to use a form P45 for a period of time.
There are four points you should consider:
● Data cleansing - submit employee data to HMRC before RTI is live so HMRC can advise correct or incomplete data
● Improve and maintain data quality - make sure you obtain dates of birth, use full names and include addresses when employees are entered on your payroll
● Speak to your payroll software supplier or payroll provider - make sure they can deliver on RTI
● Banking - are you able to use a file your payroll software generates to submit to BACS using your banking facility?
HMRC has been advising consultation groups that penalties for non-compliance will initially be "softly, softly". However, it was originally suggested that penalties for late filing the final RTI submission of the year (in place of a P35) will be the same as current penalties for filing a late P35 and that the year after would see penalties applied for each late filing of RTI data during the year.
So take the opportunity to get things in place while HMRC is being relaxed, because penalties for non-compliance could run up quite quickly once they start to be issued.
Further legislation on penalties will be published by HMRC in due course but we can see that it is very keen to implement these changes to ensure it collects taxes more regularly and to bring in a benefits systems based on up-to-date, real-time information.
Ken Davies is director of Mitchell Charlesworth's outsourced payroll department