Real Time Information - Are You Ready?
Real Time Information (“RTI”) is a new PAYE submission, to be implemented by HMRC in order to more accurately calculate state benefits under the proposed Universal Credit (“UC”) system. Currently, the Department of Work and Pensions (“DWP”) is reliant on self-reporting and annual P35/P60s to calculate the various benefits paid out to individuals. This data is often late and inaccurate, which has resulted in both over- and under-payments.
In preparation for the introduction of the UC system in April 2014, RTI is being brought in to enable HMRC and the DWP to see, in real time, how much people are entitled to in benefits. Not only will this reduce benefit fraud, but it will also make the administration of UC easier, improve work incentives, smooth the transitions into and out of work and reduce in-work poverty.
When will this come into place?
HMRC have stated that they expect the majority of employers to start making RTI submissions from April 2013, with all employers operating it from October 2013. HMRC will notify each company of the date they must join the scheme.
For employers with over 250 employees, or those with a ‘split’ PAYE scheme, there is a mandatory submission called the ‘Employer Alignment Submission’ (EAS). This will need to be submitted before the first RTI submission. HMRC will then use this data to match employers with information held in individual employee records, to ensure that the information that HMRC holds is initially accurate.
The EAS is optional for smaller companies and, whilst it may be a small administration burden, it is likely to be worth submitting, as HMRC’s data on employees may not be accurate or up to date.
The data to be submitted on the EAS includes information on employees’ legal names, addresses, dates of birth, genders and tax codes.
What will employers have to do?
Businesses will have to submit regular RTI submissions, in line with payroll frequency, on or before the pay date subject to the modified arrangements detailed below. The submissions will come in two types:
Full Payment Submission – information regarding individual employees
Employer Payment Summary – as part of this submission, you will have to duplicate the information provided in the EAS, as well as providing the following information:
- The BACS hash code
- Employees’ passport numbers – where held
- Indication of employees’ student loans
- The Payroll ID – where the employer has more than one employment contract with you
How will submissions be made?
HMRC has outlined that they expect submissions to be made by:
- The Government Gateway; or
- The Electronic Data Interchange (EDI), which will be available until at least 2014; or
- BACS alongside the payment instruction (HMRC’s preferred option)
Electronic submissions could also be made by:
- Commercial Payroll packages
- HMRC’s free RTI-enabled software (if fewer than 9 employees)
- HMRC’s “Assisted Digital” package (in development)
Paper submissions will only be accepted in special circumstances.
Who else is impacted?
An RTI submission needs to be made by every PAYE scheme on or before the pay date. This will include:
- Pension Schemes
- Individuals who receive council funding to arrange their own personal care
- Tronc payrolls
If you pay one group of employees weekly and another group monthly, do remember that you will need to make weekly RTI submissions for the first group and monthly submissions for the second group subject to the modified arrangements detailed below.
How can you prepare for the change?
So that you are ready for the HMRC letter requesting you to join the scheme, you should review your employee details and:
- Get rid of all “A N Others” or other inaccurate data
- Ensure you have the correct National Insurance Numbers for all employees
- Double, and triple check employees’ full legal names and payroll details
You should also ask your payroll software provider when they will be providing you with the update for RTI.
All of these preparations will ensure that this is a smooth operation, with limited hassle. We do not expect that RTI submissions will add significantly to the majority of companies monthly administration, but it will be absolutely critical that every employer is prepared in advance for this change.
Update: HMRC relaxes RTI reporting arrangements for small businesses – further extension to April 2014
HMRC has modified the arrangements for RTI compliance for employers with fewer than 50 employees.
HMRC recognise that some small employers who pay employees weekly, or more frequently, but only process their payroll monthly may need longer to adapt to reporting PAYE information in real time. HMRC have therefore agreed a relaxation of reporting arrangements for small businesses.
Employers with fewer than 50 employees, who find it difficult to report every payment to employees at the time of payment, may send information to HMRC by the date of their regular payroll run but no later than the end of the tax month (5th). This arrangement was due to end on 5 October 2013 but it has now been extended to April 2014 so that employers are not forced to change their reporting systems midway through the tax year.
If you would like to talk to us about your Payroll requirements, either to understand more about Real Time Information and the implications for your business, or about our Outsourced Payroll solution please do not hesitate to contact us.