Insights

Usually, when the big supermarkets save money, they advertise the fact that they give it back to their customers in the form of price cuts. That same logic is unlikely to be adopted by HMRC, which hopes to save at least £7.5 billion a year when it introduces Real Time Information (RTI) from April 2013. These savings are expected to be realised through reduced incidence of benefit fraud and a more efficient tax collection system.

This month marks the soft launch of the new RTI payroll system, with 250,000 early adopter employers starting to use the new system. It has been described as the biggest single change to the UK’s payroll system since the 1940s and is primarily being introduced to support the arrival of Universal Credits, whereby all state related benefits will be combined into a single payment. In January 2013 we will be contacting all clients RJP provides a payroll service for to discuss additional information we will be needing.

Real time payroll filing throughout the year

RTI is something that every organisation which has employees who are paid through its payroll system needs to start getting ready for. Broadly, the change will mean that all employee information will need to be sent to HMRC in ‘real time’ as employees are paid, instead of sending information to HMRC once a year at payroll year end, as is currently the case. The information required will include PAYE, NIC and student loan data.  Although compliance with RTI officially begins in April 2013, this date is the commencement of a migration period and employers will have until October 2013 to be fully up and running, after which time it will be mandatory for all employers to comply fully. HMRC will be notifying employers up to 6 weeks before they are required to begin making RTI submissions.

Get data right to be prepared for RTI

If, as an employer, you outsource your payroll requirements to a third party or to your accountant, you will need to ensure the processes they will have in place from April will be adequate. If you are going to be submitting the information directly using your company’s own accounting software, some training will be required for payroll staff. By the time April comes around, all the major packages in the market, including Sage, will be fully compliant. However, what the software or any third party cannot do is ensure your data is accurate and up to date. This is going to be the most difficult aspect in the compliance process, as recently released statistics from HMRC show.

HMRC highlights problems with ‘dodgy data’

According to HMRC’s records, over 80% of the data quality problems they encounter are the result of incorrect information supplied relating to an employee’s name, date of birth or national insurance number. Believe it or not, records currently held by HMRC, provided by UK companies, show that:

• 824 employees have the surname ‘Unknown’

• 572 people have the surname ‘X’, ‘Mr X’, ‘Mrs XXXXXXXXX’ or similar

• 507 employees are called A.N. Other

• 40 employees are over 200 hundred years old

• Over 2,000 employees have the NI number of AB123456

• A further 1,000 employees have the NI number of AA111111.

Although these are extreme examples, they serve to illustrate the importance of information accuracy. As with all of HMRC’s initiatives, penalties will be introduced for non-compliance and late or incorrect filing. The exact details of this are still being fleshed out, but you can be sure that company directors will be held personally accountable for ensuring payroll processes are ‘fit for purpose’.

One of the best preparatory activities you can be undertaking right now is to ensure that all the employee information included within your payroll records is accurate and complete.  If you rely on your employees to gather and maintain this information, then they need to be educated about why it’s so important to have full and accurate information recorded.

Data you need to have available for real time PAYE filing is each employee’s full name, date of birth and national insurance number, with must be in full and correct. This information should be verified using official sources such as HMRC and /or Department for Work and Pensions documentation, a passport, birth certificate or driving licence.

From April 2013, you will also need to include new information in your payroll records, such as hours worked. Employee information for temporary and casual workers and employees paid below the national insurance lower earnings limit will also need to be filed.

If an employee cannot produce a national insurance number, you can help them to check official HMRC or Department of Work and Pensions (DWP) documentation. If they still can't locate it, they can download Form CA5403 from HMRC’s website or phone the Registration Helpline on 0845 915 7006. If an employee has never been issued with a National Insurance number, they should phone Jobcentre Plus on 0845 600 0643.

5 ways to get prepared for RTI – Handy checklist

1. Talk to your accountant, payroll bureau or payroll service provider. You need to understand how they will be providing your existing payroll service from April 2013. Ask them what you need to do to get ready for RTI. In January 2013 we will be contacting all clients RJP provides a payroll service for to discuss additional information we will be needing.

2. If you pay your employees by Bacs, speak your solution supplier or bureau.

3. If you run your own payroll system, you’ll need to get RTI-enabled software in order to send your PAYE information to HMRC online every time a payment is made. This can be achieved in three ways:

- Commercial payroll software and upgrading your existing software if necessary

- Payroll service provider i.e. an accountant or payroll bureau to do it for you

- Free payroll software packages or HMRC’s free Basic PAYE Tools (for organisations with nine or fewer employees).

4. Check existing employee information - name, date of birth, gender, address and valid National Insurance number – to ensure it is accurate and up to date. When undertaking this process, ask employees to bring in official documentation so you can check the information is correct. As the employer you are responsible for filing accurate information.

5. Think about how operating PAYE in real time might affect your business more widely. For instance, will you need to change procedures for starters and leavers.

For more information or to discuss how to get ready for RTI, please contact Simon Paterson by emailing sp@rjp.co.uk.

www.rjp.co.uk