Guest post by Paul Donno (Jacobs Allen Chartered Accountants & Chartered Tax Advisers).
It struck me today whilst reading more about ‘Real Time Information’ that it could cause a burden that could really affect some small business owners.
To give people time to adjust, HMRC are not fining businesses on RTI for late returns in 2012/13 and 2013/14. However from May 2014 all businesses must make sure that their returns are filed on time and realistically this can only be done with good RTI compliant software. Yes, HMRC have their own portal for small employers but I wouldn’t use that!
The biggest difference with RTI is the time that you declare that payments are made. The phrase used for declaring the information to HMRC is “on or before”. Therefore the notification to HMRC of the payment to your employee is on or before the day that you make the payment (this includes the payment to the Director of the business or a casual member of staff that has just done a couple of hours work).
For example, if you own a public service type business such as a Public House and you pay your employees out of that days takings, make sure that you have a system to tell HMRC on that evening!
Do you employee your children for some ad hoc jobs or a friends’ son or daughter to do few chores? Currently you would ask them to complete a P46 advising that it is their only job and therefore reportable at the year end on a P38.
With RTI this is about to change and cause an increase in red tape for our smaller clients.
Today I was speaking to a client of mine that runs her own Limited Company and during busy times employs the services of a friends’ daughter to input data into her system. Under the current system the £35 that she paid her would be recorded as casual wages with a completed P46 or P38(S) Student Employee form. From 6 April 2013 this will change and the casual worker who may only earn that £35 needs to be treated as a full employee and get reported in Real Time to HMRC. This can push up the cost to the small business owner or dare I say it not declare the cash paid out!
The simplest solution is to use software such as Sage One Payroll which is RTI-compliant and costs just £5, £10 or £15+VAT per month (depending on how many employees you have). At £5 for 5 employees this is cost effective to the small business owner and the tuition videos are very helpful.
Knowing when you have to tell HMRC of your employee payments and recognising what is an employee payment is going to be so important from 6 April 2013. If you need help setting up your Sage One Payroll system or some friendly advice on Real Time Information, just firstname.lastname@example.org