We are RTI ready are you?

THIS IS VERY IMPORTANT INFORMATION

What's changed - PAYE in real time

From 6 April 2013 you will have to start reporting PAYE information in real time. You may see this referred to as Real Time Information - or RTI.

Unless HM Revenue & Customs (HMRC) has notified you otherwise, changing to PAYE in real time is mandatory. Each time you pay an employee after 6 April 2013 you must submit details about employees' pay and deductions to HMRC using payroll software.

Some employers have already started in 2012-13 as part of an HMRC pilot.

How will it affect you?

As an employer, each time you pay an employee, you already keep payroll information. After 6 April 2013 you will still operate PAYE in the same way but you must submit the payroll information you already keep to HMRC on or before the day you pay your employees.

You use a Full Payment Submission (FPS) to do this.

Your payroll software will generate the new reports you need and submit payroll information online. These will include details of:

• the amount you paid your employee(s)
  
  
• deductions, such as Income Tax and National Insurance contributions (NICs)
  
  
• starter and leaver dates if applicable
  
  

You need to include the details of all employees you pay, including those who earn below the NICs Lower Earnings Limit (LEL), for example students.

You no longer submit end-of-year forms P35 and P14 and the starter and leaver process is simplified. You continue to give your employee a form P45 (employee parts) when they leave but you no longer send forms P45 (part 1) or P46 to HMRC. Instead you must report all starter and leaver information via your payroll software each time you pay someone.

This means that employers (or their accountant, bookkeeper or payroll bureau) will have to:

• send details to HMRC every time they pay an employee, at the time they pay them
• use payroll software to send this information electronically as part of their routine payroll process

How you submit your PAYE details

When you run payroll, your software gathers the PAYE information you send to HMRC, based on the payroll entries you make. You can use any RTI-enabled commercial payroll software (there are some free packages available) or HMRC's Basic PAYE Tools package which is designed for employers with nine employees or fewer.

You submit your PAYE information online to HMRC using commercial payroll software or HMRC's Basic PAYE Tools, if it's suitable for you. You do this via the Government Gateway, the online entry point to government services. You cannot use HMRC's PAYE Online Returns and Forms direct from the HMRC website to send this PAYE information.

You may be able to use Electronic Data Interchange (EDI) if you use commercial software. EDI is a dedicated connection or a secure network more suitable for large employers with employees running into the thousands. If you want to use EDI you must check if your payroll software supports it.

Changes to PAYE Online for real time reporting

Employers who are reporting their payroll information to HMRC in real time will use fewer features of PAYE Online than they did previously - even though those features still exist for employers not yet operating PAYE in real time.

You still submit reports online but these reports will be sent directly to HMRC using your payroll software or HMRC's Basic PAYE Tools.

You still need your PAYE Online login (User id and password) because although you can't log in directly to PAYE Online to report, you will need your login details when your payroll software sends your reports through the Government Gateway, which uses the same password and user id as PAYE Online does.

Reports that cannot be submitted directly Using PAYE Online

You will not be able to send us any of these reports by logging in directly using PAYE Online:

• an FPS
  
  
• an EPS
  
  
• an Employer Alignment Submission (EAS)
  
  
• an EYU
  
  
• an NVR
  
  
• New employee information - you mustn't send P45 Part 3, P46, P46 (Pen) or P46 (Expat) directly using PAYE Online, even if this option is still visible from the left hand menu
  
  
• Leaver information - your payroll software will send this - so don't use PAYE Online to send P45 Part 1
  
  
• End-of-year return - forms P35, P14 and P38A for years 2013-14 onward
  
  

You can continue to login directly to PAYE Online to:

• send expenses and benefits returns - including P46 (Car), P9D, P11D and P11D(b) - although this may be done directly from your payroll software if it supports this feature
  
  
• receive tax codes and notices, although you may choose to view these using the PDV, or your payroll software if supported
  
  
• set up email reminders, and also view your current tax position
  
  
• view National Insurance number verification (a new feature ) - how you can do this are explained later in this guide
  
  

Other details you may need to submit There are other submissions you may also make. These include:

• EAS to align employee records with HMRC records before you submit other information. HMRC will tell you a date you need to submit your employee details by. An EAS is only required for existing employers with a:
  
  
  • large PAYE scheme with over 250 employees
    
    
  • payroll administered by two or more payroll systems, including those operated by different payroll providers.
    
    
• NVR to verify or obtain a National Insurance number for new employees. When you send HMRC a request via your payroll you will receive a reply which you can view through PAYE Online, which will tell you if the number is right or not, or will provide a number if you haven't got one.
  
  
• EPS to report a reduction in the amount you pay to HMRC or if you haven't paid any employees in a pay period.
  
  
• EYU to correct, after 19 April, any of the year to date totals submitted in your final FPS for the previous tax year. This only applies to years after you started to send information in real time. The first year an employer can use an EYU is 2012-2013.
  
  

Please note, you cannot send an NVR until you have started to send PAYE information in real time - wait a few days after sending your first FPS before sending an NVR.

Getting your employee details ready

It's very important you use accurate employee details, such as full name, home address, date of birth, National Insurance number and gender before the new PAYE real time is introduced within your business. By doing this you will:

• ensure employees pay the correct Income Tax and NICs
  
  
• make it easier to match the information you send with HMRC's record of your employee
  
  
• reduce the number of employee queries you receive from HMRC
  
  

The best way to check these details are correct is to verify them against a birth certificate, passport, driving licence or official document from HMRC or the Department for Work and Pensions.

What will not change

The following will remain unchanged once you begin reporting PAYE in real time:

• PAYE - PAYE remains the same. It is only the reporting that changes.
  
  
• Coding notices - employers will still be able to choose how they receive coding notices, as they do now.
  
  
• Reporting a change to HMRC, for example updating employee's new name or address for HMRC records - a real time submission will not update HMRC records. It remains the responsibility of the individual employee to notify HMRC of changes of name, address and so on.
  
  
• HMRC messages to employers - HMRC will continue to use the Data Provisioning Service (DPS) and EDI outbound message services.
  
  
• Payment dates - payment dates to HMRC will remain the same.
  
  
• Forms P60 - P60s will remain the same.
  
  
• Expenses and benefits - real time reporting is not changing how expenses and benefits are reported. Employers will continue to complete and file any forms P9D, P11D and P11D(b) due under the existing PAYE arrangements.
  
  
• The Construction Industry Scheme (CIS) payment and reporting process - real time reporting is not changing the existing CIS process. Employers will continue to complete and file monthly returns (CIS300) due under the existing CIS arrangements. But where a limited company acting as a subcontractor has suffered CIS deductions they will report these amounts to HMRC on an EPS and, as they do now, subtract these from the amount of PAYE due to be paid to HMRC.

Tax Affinity Accountants are experts is Payroll and Bookkeeping for small and medium sized businesses in the Kingston upon Thames Area. For more information please visit www.taxaffinity.com. And please feel free to comment and share this with your friends.

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