Real Time Information, or RTI, is a new way of reporting Pay As You Earn (PAYE).
It’s being introduced by HM Revenue & Customs (HMRC) from 6 April 2013.
So What’s Changing?
Currently, employers send an annual return to HMRC to pay the tax and National Insurance Contributions (NICs) of their employees.
These liabilities are deducted from their employees’ pay packets each month and retained until the end of the financial year when they’re passed to the Revenue.
RTI will not change the way in which employers pay these liabilities to HMRC. What it will change however, is the process in the run up to annual return submission.
Under RTI, employers will have to submit payroll information for every employee on a monthly basis. This will need to be done on or before the day employees are paid.
What’s the Point in the Change?
‘If it ain’t broke, don’t fix it’!
While this is often the case, it doesn’t seem to be for RTI.
Why? Because when PAYE was first introduced almost 70 years ago, peoples’ employment was quite straight forward. Back then, most people had just one job and stuck to it.
Now though, because a lot of people switch between jobs, or have more than one, it is very hard for HMRC to keep their data up-to-date.
RTI is expected to create more accurate taxpayer records and also make the system easier for both employers and the Revenue alike.
It has been designed to ensure that employers pay the correct amount of tax each time as HMRC will be able to tell them how much they should pay each month.
This should result in less penalties being incurred for making late payments. Wahoo!
Do I Have to Change?
Simply put – yes!
Unless HMRC has told you otherwise, you will need to switch to PAYE in real time as of 6 April 2013.
How Do I Report PAYE Information in Real Time?
You will need to have payroll software with the RTI functionality (or your accountant will). If you haven’t, this is the first thing you’ll need to get to start reporting in Real Time.
It will be this software that you will use to submit details about employees’ pay and deductions each time you pay them.
Does the New System Reduce Any Administrative Tasks?
So we are led to believe! When you start operating PAYE in real time, there are a number of forms you will no longer need to use.
These include: forms P14 and P35, P46 and Form P38(S).
Employers will still have to provide leavers with a form P45 (employee parts), but the part previously sent to HMRC will no longer need to be.
In reality this actually creates more administrative work as an online submission is required for every single payroll period. If you run weekly payroll this means 52 online submissions in place of 1 end of year submission as per the current process!
The good news is that we will be taking care of all the RTI requirements as part of our monthly accounting service.
For further information, visit http://www.hmrc.gov.uk/payerti/getting-started/index.htm