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Are You Ready For Real Time Information (RTI)?

Real-time-infoThere are two certainties in life: death and taxes (unless you’re a major international company and then it seems you’re exempt from at least one of them). Since PAYE was instigated in 1944 it has remained largely unchanged. However, this April sees the biggest reform to business tax reporting yet, and it seems that many businesses are not prepared. Providers of corporate tax services believe that only about one in five businesses are prepared for the start of RTI (Real Time Information), and that could spell serious problems.

If you’re asking yourself what RTI is, here’s the shorthand version: RTI means that information on PAYE is sent instantaneously to HMRC every time an employee is paid, instead of being filed annually on payroll year end.

Your next question is probably: why (then maybe another couple of whys for good measure). Essentially the changes are to help with the implementation of the new Universal Credit, which needs no explanation. HMRC estimate this new system will save somewhere in the region of £7.5 billion a year due to reduction in data inaccuracies and benefit fraud. When you consider that HMRC estimates about 80 per cent of their data issues are due to inaccuracy in employer reports you can see why they are so hot on this area.

The good news is that most payroll software providers have already updated their systems to handle RTI. But there are things that all employers need to be aware of if they want to avoid the proposed fines that will be levied against companies who fail to comply, file reports late or provide inaccurate data.

One thing to get clear is that you will be required to provide a detailed list of information on employees, including: name, date of birth, NI number and address details. This applies to every employee, whether they are full- or part-time, temporary or casual. The onus here lies with you, the business owner. It will be necessary to check off all the required information against official documentations such as passports and birth certificates.

Another area for concern is payments that are generated off the payroll system, such as payment of shares or a severance cheque. Because these payments are taxable, but might not go through the normal payroll process it’s important that an RTI report is filed for them.

RTI by its very nature will also ensure that HMRC has accurate reports on what an employer should be paying in tax on a month by month basis. Therefore if they believe an employer is not paying the correct amount they will be able to apply in year PAYE penalties.

And the upside to all this? Well, HMRC predicts savings for businesses to the tune of £300 million due to reduced admin costs (once the system is properly implemented), and the end of things such as the P14, P35 and P38A end of year returns, and the P45 and P46.

Although the start of RTI implementation is April 2013, full compliance will not be mandatory until October 2013 to allow employers time to migrate and get a handle on the new system. If you’re not sure about how to get things in shape in time then a good corporate tax services provider can help you get up to speed. One thing’s for sure: RTI is coming whether you’re ready or not.

HW Fisher& Company is a commercially astute organisation – ranked as a mid-tier top 25 UK chartered accountancy firm, with a personal, partner-led service aimed at entrepreneurial small, medium enterprises (SMEs), large corporates and high-net worth individuals.

HW Fisher specialises in Real Time Information (RTI), reporting Pay, Tax, National Insurance and other details about your employees to HM Revenue & Customs (HMRC).
For more information
please visit
http://www.hwfisher.co.uk/news-a-events/news/561-act-now-to-minimise-the-impact-of-real-time-information