Get ready for Real Time Information – City Comment
6 December 2012
A huge change to PAYE returns, which will affect employers and recruitment companies, is coming into force in less than five months’ time.
Thu, 6 Dec 2012 | By Carl Swansbury, Ryecroft Glenton Corporate Finance
A huge change to PAYE returns, which will affect employers and recruitment companies, is coming into force in less than five months’ time.
From April 2013 employers will have to send PAYE data electronically to Her Majesty’s Revenue & Customs (HMRC) ‘on or before’ payments are made to employees, whether that is monthly, weekly or at the end of a shift for some casual workers.The Real Time Information (RTI) means that PAYE information, including details of all employees’ pay, tax and deductions, will be part of your routine payroll process rather than an end-of-year return to HMRC.
This marks the end of an almost 70-year-old system, which has allowed employers to effectively have a year’s interest free loan from HMRC. Businesses only caught up with PAYE liabilities at the end of the financial year.
The changes to the new system will be felt most keenly by staffing businesses who employ irregularly paid temporary workers – those who are paid at the end of a shift, for example. They will have to provide detailed information – up to a possible 108 items per employee – to HMRC online, ‘on or before’ the employee is paid. If that is on a Sunday problems could arise if payroll staff also have to work over weekends to complete the RTI.
Many recruitment businesses will be required to comply with RTI from April 2013, and all employers will have to do so by October 2013. The changes are in preparation for universal tax credits as part of the new benefit system.
Red tape will increase as returns have to be completed perhaps 12 times per year (for monthly-paid employees) or 52 times per year for weekly paid, instead of once, annually. Measures that recruitment businesses will have to take include ‘cleaning data’ so that employee facts such as name, address and national insurance number are correct, enabling HMRC to match records and account for the correct amounts.
Preparations for RTI are likely to include the provision to HMRC of an extract of all PAYE employees this tax year, even if some have since left. HMRC will compare the new data with its existing data to ensure records are updated. Employers may also have to change their internal processes, including payroll software, to accommodate RTI.
All recruitment businesses should be alert to these PAYE changes. Penalties are expected to be imposed from April 2014, and given the radical changes to the system, the incidence of penalties is likely to be high.
A huge change to PAYE returns, which will affect employers and recruitment companies, is coming into force in less than five months’ time.
From April 2013 employers will have to send PAYE data electronically to Her Majesty’s Revenue & Customs (HMRC) ‘on or before’ payments are made to employees, whether that is monthly, weekly or at the end of a shift for some casual workers.The Real Time Information (RTI) means that PAYE information, including details of all employees’ pay, tax and deductions, will be part of your routine payroll process rather than an end-of-year return to HMRC.
This marks the end of an almost 70-year-old system, which has allowed employers to effectively have a year’s interest free loan from HMRC. Businesses only caught up with PAYE liabilities at the end of the financial year.
The changes to the new system will be felt most keenly by staffing businesses who employ irregularly paid temporary workers – those who are paid at the end of a shift, for example. They will have to provide detailed information – up to a possible 108 items per employee – to HMRC online, ‘on or before’ the employee is paid. If that is on a Sunday problems could arise if payroll staff also have to work over weekends to complete the RTI.
Many recruitment businesses will be required to comply with RTI from April 2013, and all employers will have to do so by October 2013. The changes are in preparation for universal tax credits as part of the new benefit system.
Red tape will increase as returns have to be completed perhaps 12 times per year (for monthly-paid employees) or 52 times per year for weekly paid, instead of once, annually. Measures that recruitment businesses will have to take include ‘cleaning data’ so that employee facts such as name, address and national insurance number are correct, enabling HMRC to match records and account for the correct amounts.
Preparations for RTI are likely to include the provision to HMRC of an extract of all PAYE employees this tax year, even if some have since left. HMRC will compare the new data with its existing data to ensure records are updated. Employers may also have to change their internal processes, including payroll software, to accommodate RTI.
All recruitment businesses should be alert to these PAYE changes. Penalties are expected to be imposed from April 2014, and given the radical changes to the system, the incidence of penalties is likely to be high.
