RSM Tenon on the taxman's Real Time Initiative
AS an employer you may find payroll time consuming.
It can be difficult keeping on top of the legislation and dealing with the risk of staff being absent through illness or holiday.
April sees the introduction of yet another potential headache for those running payroll with the introduction by HMRC of RTI.
What is it? RTI stands for Real Time Information, which is being introduced by HMRC with the aim of improving how the Pay As You Earn system works. PAYE information will be collected each time employers run their payroll, rather than the current system of submission at the end of the tax year.
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Why is it being introduced?
Currently, employers and pension providers send HMRC pay and tax information annually. This can make it difficult to keep an individuals' data up-to-date and may mean that they have overpaid or underpaid tax at the end of the tax year.
Under RTI, employers and pension providers will send information to HMRC every time they pay their employees. This better-quality, more up-to-date information will mean that, over time, more people will pay the correct tax at the right time.
RTI will also support the introduction of Universal Credit, the Government's flagship welfare programme.
Universal Credit will need up-to-date information about employment and pension income so that the Department for Work and Pensions can adjust claimants' welfare payments to reflect their circumstances.
When does it come into force?
It will be introduced from April 2013 for most employers.
What impact will it have on your business?
Instead of submitting tax data at the end of the tax year, you will need to do this for every payroll run, whether it's weekly, fortnightly or monthly. Your employee payroll files will need to exactly match HMRC's records in terms of employee names, addresses and NI numbers and working hours should also be included. There will be penalties for incorrect and failed submissions.
The key to making successful RTI submissions is ensuring that your data is clean, correct and valid and that you are running RTI-compliant payroll and Bacs software before April.
By doing this sooner rather than later you will be secure in the knowledge that your organisation is well placed to process successful RTI submissions within the legislated timelines and avoid penalties.
With the introduction of RTI, HMRC will have up-to-date PAYE information and will be instantly aware if employers do not make timely and accurate payment of their monthly PAYE.
From HMRC's perspective, this will be a good thing but, from an employers' perspective, it could be a potential nightmare if they are not RTI ready.
Are you ready for RTI?
If payroll is giving you a headache at the moment, it is likely to get worse as the onset of RTI approaches.
Top tip: Outsourcing your payroll now to a high-quality payroll service will help you avoid being consumed by running payroll.
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