By Neilson Watts (Associate Product Manager, Sage One UK).
Real Time Information (or RTI for short) is an HMRC initiative to improve the accuracy of PAYE, reducing the need to send out corrections for overpayment or underpaying and the possibility of fraud.
Under new RTI legislation, employers will be required to submit information electronically via the internet to HMRC on or before they pay their employees instead of just once a year.
When will your business need to be ready for RTI?
For the majority of businesses in the UK (employing up to 5000 employees), RTI becomes compulsory from April 2013 and then compulsory for all employers by October 2013.
What will this mean for your business?
You will need to submit information electronically to HMRC for PAYE, NIC and Student Loans every time you pay your employees.
You’ll need up-to-date details for ALL your employees – including temporary and casual workers and employees paid below the National Insurance Lower Earnings Limit.
What will I need to submit to HMRC under RTI?
Under RTI there are up to 4 different types of submissions you will need to make to HMRC:
- EMPLOYERS ALIGNMENT SUBMISSION (EAS) – a one off submission that will be used by HMRC to match and align your company and employee records against the data HMRC hold.Only large employers who employ more than 250 employees will need to submit an EAS, but small and medium employers can volunteer to submit if they wish to.
- FULL PAYMENT SUBMISSION (FPS) – the main and most common submission type consisting of the employee payments and deductions that will be required each time an employer makes a payment to an employee.You will need to submit an FPS every time you make a payment to an employee, the submission must be made on or before the date the employee is paid. HMRC will use this submission to calculate how much PAYE and NIC liability is due from you each tax month.
- EMPLOYERS PAYMENT SUMMARY (EPS) – only submitted where you need to advise HMRC of any alteration to this liability (such as where reclaiming statutory payments) or where you are informing them of a nil payment.You should make this submission when or before the relevant monthly or quarterly liability payment is made to HMRC.
- NATIONAL INSURANCE NUMBER VERIFICATION REQUEST (NVR) – An employee’s National Insurance is a vital piece of information under RTI which uniquely identifies an employee. An NRV submission allows employers to validate an employee’s National Insurance Number (NINO) or request one where a new or existing employee does not have one.
What you will need to do to comply for RTI?
If you outsource your payroll to an Accountant or Payroll Service provider, you should ask them what they are going to do to help ensure your business will be RTI compliant.
If you use Payroll software, you should check with your software provider to understand how they are going to help you become RTI compliant. If you are using desktop software, it’s likely that they will provide you with a software update that you will need to install in preparation. For those who are using cloud-based software then your provider should be seamlessly and automatically enabling the software to make RTI returns from 6th April 2013. Our Sage One Payroll software has been RTI Ready since October 2012.
How can you prepare your business for RTI compliance?
The key to successful implementation and compliance of RTI is simple…don’t leave it to the last minute! Familiarise yourself with RTI by reading all the great information and guides on the www.sage.co.uk/rti website and don’t be afraid to ask your payroll provider how they are going to help ensure your compliance with RTI.
Invest some time in carrying out an audit of your employee’s payroll data to ensure its accurate and up-to-date, as incorrect information such as Name, Date of Birth, National Insurance Number and Gender are used to match your records against the records HMRC store.
Why quality of your payroll data is critical to the success of RTI
Under RTI, the information that you submit to HMRC every time you pay your employees is matched against records HMRC store on their National Insurance and PAYE Service (NPS). If the records you submit don’t match, you may trigger creating duplicate or inaccurate records which may result in incorrect tax calculations or HMRC compliance checks.
Make sure you have the correct details for your employees, wherever possible check the information you need against an official document such as:
- HMRC and /or Department for Work and Pensions documentation
- Passport documentation
- Birth Certificate
For more information about getting your employees information correct in preparation for RTI , visit www.hmrc.gov.uk/rti/dip/get-payroll-right.htm
What happens if you don’t comply with RTI?
- Penalties for late in-year Full Payment Submissions (FPS) will not begin until April 2014.
Note: The current penalty process will continue to apply at the year end, with a penalty issued if the relevant information is not up to date by 19 May. Letters will be issued to employers from October 2013 to ensure they understand they would have been liable to a penalty.
- Automated late payment penalties will not begin until April 2014.
- No penalties for inaccurate in-year FPS will be charged for the 2012-13 tax year.
- Penalties may be charged after the end of the tax year based on final FPS for the year.
- Inaccurate FPSs for the 2012-13 tax year may incur in-year penalties.
For more information relating to the penalties and fines dues to RTI please visit www.hmrc.gov.uk/news/payerti-payments.htm
How RTI changes the way you do your Payroll
The good news about RTI is that the fundamentals of running a payroll remain exactly the same as they do today, but there are some key changes you need to be aware of: –
Processing your employees payroll
- You will need to submit your Full Payment Submission to HMRC electronically each time you pay your employees (something that Sage One Payroll does automatically).
Taking on new employees under RTI
- You will no longer need to submit a P45 /P46 to HMRC
- You should still accept a P45/P46 from a new employee
- You should get your employee to complete new starter statements
- New starters will be submitted by the Full Payment Submission under RTI
Making an employee a leaver under RTI
- You will no longer need to submit a P45 to HMRC
- You should still provide the employee with a paper copy of their P45
- Leavers will be submitted by the Full Payment Submission under RTI
Irregularly paid employees under RTI
- You will need to include details about employees regardless of whether they are being paid or not as part of the Full Payment submission.
Paying HMRC outstanding PAYE and National Insurance liability
HMRC will know from your regular Full Payment Submission how much your outstanding PAYE and National Insurance Contributions.
- You will need to submit an Employers Payment Summary. If you need to inform HMRC of a difference in your PAYE and National Insurance liability due, for example if you are recovering Statutory Sick or Maternity Pay or advising of a nil payment.
- You will continue to pay HMRC outstanding PAYE and National Insurance Contributions by 19th or 22nd of the following month
Payroll Year End under RTI
- You no longer need to submit P35 and P14
- You will to continue to provide employees P60 End of Year Summary
How will Sage One Payroll help me to be ready for RTI?
Sage One Payroll is the brilliantly simple online payroll solution that guarantees your RTI compliance. You can run a payroll in 4 simple steps in fewer than 5 minutes from as little as £5 employee per month. Find out more and start your FREE 30 day trial of Sage One Payroll today!