Guide to: PAYE – Real Time Information (RTI)

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A guide to
PAYE – Real Time Information (RTI)
Are you Ready?
A SIMPLE GUIDE TO REPORTING PAYE IN REAL TIME.
The arrival of RTI is imminent. Make sure you are ready.
The 2013/14 tax year sees the biggest change in the PAYE system since its introduction in 1944. Originally, the
intention had been that virtually all employers would be affected with effect from 6 April 2013, with very few
exceptions. However, due to teething troubles, HMRC will allow employers with fewer than 50 employees to
defer its introduction until 6 October 2013.
The changes are necessary, not only to provide the 70 year old, war-time system with a long-overdue overhaul,
but also to support the operation of the new Universal Credit system which is being introduced with effect from
6 October 2013 as the replacement for a variety of benefits such as Working Tax Credit, Jobseekers' Allowance
and housing benefit.
HMRC's systems will link directly to the Department of Work and Pensions (DWP) and it is anticipated that the
new system will support a less bureaucratic tax credits and benefits system, which will reduce the capacity for
fraud and error, which is estimated to cost the economy £1 billion a year.
RTI In a Nutshell
Under RTI, information about the income tax, National Insurance contributions (NICs) and other deductions due
under PAYE must be submitted throughout the year as part of the payroll process, rather than at the end of the
year as they are now. Every time the payroll is processed, the PAYE software will collect the necessary
information and send it to HMRC online, ‘on or before’ the pay date.
HMRC will no longer require the end-of-year Employer Annual Return forms P35 and P14, and they will no
longer require submission of forms P45 or P46. Instead, the information will be reported in real time.
HMRC Awareness Campaign
Research indicates that, although many of the larger employers are already taking steps to ready themselves for
the introduction of RTI, many employers remain unaware that RTI is just around the corner. It is important that
all employers and pension providers understand the significance of reporting PAYE in real time.
HMRC has been running an awareness campaign to ensure that businesses are prepared for its advent and have
been writing to employers to tell them what they should be doing to ready themselves for RTI. HMRC is also
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keeping employers up to date in the lead up to RTI, via its employer bulletins, which are accessible via its
website.
Who will be Affected and When?
Employers and pension providers will be required to operate RTI from 6 April 2013, although there are some
exceptions. The most notable exemption, and one that was announced by HMRC at the eleventh hour, is that
employers with fewer than 50 employees may defer the implementation of RTI until 6 October 2013. Large
employers with schemes with 5,000 or more individuals may also defer implementing RTI if they have not been
able to get their systems in order but this only by agreement with HMRC, which will agree a later implementation
date. However, this cannot be later than October 2013 as this is the start date for Universal Credits.
HMRC has identified a number of special types of PAYE scheme which may be subject to different
implementation dates but these are very limited. The main group is care and support employers, (those who
employ someone to provide support to a disabled, elderly or infirm person at their home). There are a small
number of other non-standard PAYE schemes that will continue to use existing paper arrangements until April
2014, such as employers with religious objections to electronic communications and users of certain special
schemes for Examination Fees.
A very small number of PAYE schemes are outside the scope of RTI altogether. These include: Tax Award
Scheme, Offshore Protocol and Contractor Only (no employees).
HMRC will be writing to all employers in February to confirm the date from which they need to commence
reporting under RTI.
What Will Stay the Same?
RTI represents a new way of reporting PAYE to HMRC. The following aspects of PAYE will remain the same:
• The way tax and National Insurance contributions are calculated will not change
• You will still need to give employees certificates of tax and NICs paid – form P60
• You will still need to send expenses and benefits returns (P11D and P9D) annually
• The dates by which you must pay HMRC stay the same.
What Does Reporting in Real Time Mean?
The essence of reporting in real time means that you will be required to report to HMRC every time you pay
them, either on or before the payment date.
Under the system, there will be some new kinds of submission required. These are:
 Employer alignment submissions (EAS) – This is a one-off submission, which helps HMRC align their
date with that of the employer. They are compulsory for employers with more than 250 employees or
operate a split payroll. They can be submitted voluntarily in other cases.
 Full payment submissions (FPS) – This will be the routine submission that will need to be made every
time you pay your employees and will report the PAYE payments due to HMRC.
 Employer payment summary (EPS) – This will be required in cases where you need to reduce the
amount of PAYE due to reflect SSP, SMP, CIS deductions or NIC holiday.
 Earlier year update (EYU) – This form will be required when an employer wishes to make corrections to
returns submitted for earlier years returns for 2013/14 onwards.
Getting Ready – What Should I be Doing?
There are several things that employers should be doing to ready themselves for the commencement of RTI:
Software – It is essential that employers ensure that their payroll software is RTI compliant in time for its
implementation in April 2013. Employers will need to consider their payroll software options. A wide range of
commercial software designed for real time reporting will be available from April 2013. HMRC’s Basic PAYE
Tools will also be available for employers who have nine or fewer employees.
Employee data – Improving data quality is important preparation for a successful transition to RTI. In advance
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of the implementation of RTI, employers should review the integrity of their employees' data. If the data
submitted to HMRC is faulty, this could lead to the creation of duplicate or inaccurate records.
HMRC are urging employers to carry out a review of the following data, in advance of RTI going live:
Employee name, address and gender:



Always provide the individual's full and official forename(s) and not just their initial(s).
Make sure that their forename(s) and surname are in the correct order.
Check that you have spelt names and addresses correctly and ensure you have specified the correct
gender.
Date of birth:


Ensure that dates of birth are correct and do not use any dummy dates of birth.
Check that the date of birth is in the correct format. Enter the day, month and full year of birth.
National Insurance Number:
 Always enter the correct National Insurance number.
 Do not make up a number or use a default number or use a number belonging to someone else.
HMRC's real time information system does not currently recognise National Insurance numbers prefixed 'MA'
(those issued in the Isle of Man). Although these numbers are valid in the UK, a message will be sent to the
submitter to say that they are incorrect. Employers should ignore such messages and continue to use the
National Insurance number supplied by their employee.
It is recommended that all data should be verified against official documentation such as passports, driving
licences and national insurance cards.
Penalties for Late Returns
HMRC have announced that, following consultation with the profession, that they will not levy penalties for the
late submission of full payment submissions (FPS) during the course of the tax year, for 2013/14. They will,
however, charge a penalty if the final FPS for the tax if it is not submitted by the due date of 19 April 2014
(although it is possible to extend the end-of-year deadline to 19 May 2014 by submitting an earlier year update
(EYU) by that date for 2013/14 only).
Payment
From 2013/14, HMRC’s PAYE payment bank account is changing. ALL employers should now make their PAYE
and CIS scheme payments to the following account:
Sort code
Account number
Account name
08 32 10
12001039
HMRC Cumbernauld
Conclusion
All employers should start taking action now, particularly making sure their software is ready and also to ensure
consistency of data.
For further information on RTI, please visit the following sites:
http://www.hmrc.gov.uk/payerti/index.htm
http://www.payerti.org/
ACCA LEGAL NOTICE
This is a basic guide prepared by the ACCA UK's Technical Advisory Service for members and their clients. It should not be used as a
definitive guide, since individual circumstances may vary. Specific advice should be obtained, where necessary.
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