Real Time Information (RTI) is a new way of reporting PAYE and will be introduced from April 2013.
Most employers will be required to conform from April, with all remaining employers required to do so before October 2013.
RTI is being introduced in order to facilitate the introduction of Universal Credit which will replace Tax Credits.
What is changing?
Using RTI, employers will tell HM Revenue & Customs (HMRC) about gross pay, tax, National Insurance contributions when or before payments are made; instead of waiting until after the end of the tax year.
Employers will be required to make submissions under RTI known as ‘Full Payment Submissions’ (FPS) and as mentioned above will include details of pay and deductions made on each payroll run. The information required to complete the FPS will be collected by the payroll software used and sent to HMRC automatically online.
If you are preparing your payroll yourself, you should contact your payroll software provider to find out whether they are RTI-compliant.
What do Employers need to do in the run up to RTI?
HMRC will contact employers to tell them when they first have to start submitting under RTI. But there are steps employers need to take ahead of the RTI joining date:
1. Check Employee Information
Employers should ensure their employee information is accurate before they migrate to RTI. This means checking details like:
- Their full name;
- Home address;
- Date of birth;
- National insurance number; and
Please note, there are different rules for ‘large’ employers (those with over 250 employees).
The first FPS must also include the hours that each employee regularly works in a week. This information is required for Tax Credit purposes. Subsequent submissions will only include details of those paid on that particular pay run.
3. Lower Paid Staff
Normally, for staff paid under the Lower Earnings Threshold (LET) (currently £107 per week), employers probably would have just completed a P46 (which they simply kept on file; rather than submitting to HMRC) and then completed the P38A – Employer Supplementary Return at the year end.
However, under RTI these employees will also need to be reported on, so you will have to obtain their details just like any other normal employee.
4. The year of joining RTI
The first FPS submission will need to include details of all employees who have been employed during the tax year they join RTI. Therefore, the first FPS will include all starters and leavers that have occurred during the tax year they join RTI.
RTI: Employers’ FAQs
I pay all of my staff £100 or less- so I have never registered as an employer. Does RTI apply to me?
No. Under existing rules, if an employer pays all of their employees at a level below the lower earnings limit (LEL) which is £107 for the year to 5th April 2013, and none of them have stated that they have another job on a P46, then the employer is not required to register as an employer for PAYE.
These rules will not change under RTI and there will be no requirement to register for PAYE or report under RTI.
Do I still need to provide my employees with P60s at the year end?
Yes. P60s will still have to be issued to employees at the end of the year and P11Ds will be completed under the existing procedures.
I am the sole director of my company and I pay myself just enough to ensure I qualify for state benefits. Does RTI apply to me?
Yes. If an employer is registered as such with HMRC, then an FPS will need to be run if any payment is made to an employee; regardless of whether PAYE and NIC are due. Therefore where a sole director receives a monthly notional salary to earn a qualifying year for state benefit purposes, then an FPS will still need to be submitted to report the fact that a payment was made and that no PAYE or NIC is due.
Having said that, if your company is not obliged to register as an employer, RTI does not apply to you – see the first question.
Will I now need to pay my staff by BACS?
No. HMRC are not presently prescriptive about the method used to pay employees. And under the existing proposals for RTI, HMRC will not look to mandate how employees are paid. So unless anything changes, you can continue to use whichever method you wish to pay employees.
However, if you are already paying your staff by BACS and will continue to do so after April 2013, there will be changes for you to make as additional information will need to be included in the BACS reference.
If I don’t pay any employees during a period, do I still need to make a submission?
Yes. But if there are no payments made to any employees in a month then an Employer Payment Summary (EPS) can be sent instead.
What is the process for Starters under RTI?
When a new employee starts then forms P45 or P46 are no longer sent to HMRC. The details will instead be taken and entered into the payroll software and the correct information will automatically be reported to HMRC in the weekly or monthly FPS.
What is the process for Leavers under RTI?
When an employee leaves then they will still be issued with a P45, however this will not need to be sent to HMRC. As with starters, the information will be submitted in the FPS from the information in the payroll software.
Other changes to note
The current penalty process will continue to apply so penalties can be charged for missing payments and a late year end return. Furthermore, penalties for underpayments could also apply from April 2013, as HMRC will now have the real-time data to check your payments to them against.
HMRC have also said they “could” charge an Inaccuracy penalty from April 2013. Thankfully they have announced that there will be no late filing penalties if in-year Full Payment Submissions (FPS) are sent in late, until April 2014.
Form P38(S) will be scrapped from 6th April 2013, which means student employees will be treated exactly like any other employee and their earnings will be subject to normal PAYE and NICs procedures. But clearly, due to the level of their income, they are likely to be entitled to a tax refund.
How can TaxAssist Accountants help me?
Throughout the year, we will calculate your employees’ net pay and provide you with payslips to pass on to your staff.
We can calculate the tax and National Insurance deductions and advise you during periods of sick, paternity or maternity leave. We can also help you to keep track of their holiday entitlement and can file all the starters and leavers forms on your behalf.
We can file all of your year end returns for you with HMRC and provide you with P60s to distribute to your employees.
And our payroll software is on HMRC’s list of RTI-compliant software so you can rest assured that we can manage the migration into RTI and all of the reporting changes that it entails, leaving you to concentrate on managing and growing your business.When a new employee starts then forms P45 or P46 are no longer sent to HMRC. The first FPS submission will need to include details of all employees who have been employed during the tax year they join RTI. Therefore, the first FPS will include all starters and leavers that have occurred during the tax year they join RTI.
By Jo Nockels
Last updated March 2013
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.