HMRC will be introducing a new way of reporting PAYE called Real Time Information (RTI) from April 2013. This means that each time a payment is made to an employee on PAYE, all information gets submitted straight away rather than just once at the year-end as it is with the current system. So with a weekly payroll you submit weekly, with a monthly payroll it’s every month.
Before the changeover to the PAYE real time scheme it’s important that the data held in your payroll records are complete and accurate. You must check and, if necessary, update the data for all your employees or pensioners – certain details are essential such as name, date of birth and National Insurance number, and must be in full and be correct.
When you report your payroll information in real time, you will need to send certain information that you may not currently keep on your payroll system. So you may need to change your processes to collect this new information. E.g. “hours worked” – information will be needed on approximately how many hours your employees work in a week.
You will also need to submit details of payments made to all staff no matter how much they earn, whether that be below the LEL or those paid just once a year. You will need to indicate their employee status which could be lower paid, temporary, irregular or casual. Be sure to get this right! If appropriate, set the irregular payment indicator so HMRC does not assume an employee has left your employment just because they have not worked for a while.
To make your first PAYE real time payroll report successful, the data that HMRC holds on your employees must match your payroll data.
Payroll summaries you need to report
You submit a Full Payment Submission (FPS) to tell HMRC each time you’re due to pay employees. If you don’t have any employees to pay during a pay period you will need to submit an Employer Payment Summary (EPS) instead of a FPS to say no payments have been made.
In some cases, you may submit an EPS as well as an FPS where there’s a reduction in the amount you pay to HMRC. This may occur if you need to reduce the amount of PAYE or National Insurance contributions you pay to HMRC to recover statutory payments, CIS deductions suffered and NICs holiday.
HMRC believe that moving to a real time reporting system will bring PAYE into the 21st century. They say it will make operating payroll easier for employers and pension providers and make the PAYE system easier for themselves to administer. Over time it will also make PAYE deductions more accurate for individuals.
Looking ahead, this new way of reporting payroll information will also support the operation of Universal Credit when the Department for Work and Pensions (DWP) introduce it in October 2013.
The Implications of getting your real time information wrong
1- Employees may not receive the Universal Credit to which they are entitled.
2- Employers and Pension providers may receive unnecessary and unwanted contact from the HMRC.
3- Employers and pension providers who do not meet there statutory obligations run the risk of incurring penalties.
To learn more about the RTI system you can visit the following websites:
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Mark Tarrant – 1 March 2013
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