Real Time Information
Real Time Information (RTI) is the biggest change to PAYE since its inception more than 60 years ago and will affect all employers. RTI is being introduced by HM Revenue and Customs (HMRC) to modernize the current PAYE system which updates individuals’ records retrospectively at year end when their employer submits an end of year return.
There are a number of reasons why RTI is being implemented. First of all, to enable HMRC to update taxpayers’ records accurately throughout the year. Currently, only 30% of all new starters provide their new employer with a P45. RTI will provide HMRC with confirmation of the amount of PAYE and NICs etc that an employer is due to pay at any given point in the tax year. Currently, the Treasury estimates that employers underpay up to £3 billion in PAYE during the tax year.
However, the real driving force behind RTI is the implementation of Universal Credits by the Department for Work and Pensions (DWP) from October 2013. For Universal Credits to be successful, the DWP must have up to date information on a claimant’s income.
The current Tax Credit system relies on claimants declaring their income on their application form but as a result approximately £2 billion per year is fraudulently claimed. The introduction of Universal Credits will seek to eradicate fraudulent claims for benefits.
So what is RTI or Real Time Information? In simple terms it is a data file which must be sent by employers payroll departments to HMRC on or before an employee’s payday, providing details of an individual’s pay, tax, National Insurance, statutory payments etc and net pay. There is a list of over 150 items of data, but the average employee’s pay would be approximately 25 to 30 items of data. There are two ways in which employers can submit their RTI data; via the Government Gateway using the Internet or through Electronic Data Interchange (EDI).
To ensure that the project is implemented successfully, HMRC began with a pilot scheme from April 2012 which will run for one year. Initially 310 employers volunteered to join the pilot. The very first transmission of RTI involved just one employer in April with a further 9 following that month. Then the remaining 300 employers on the pilot were gradually staggered to join the programme. In July a further 1300 employers were due to join the pilot but in fact over 1800 employers were accepted.
In the next stage, HMRC are asking for 250,000 employers to join the pilot between November 2012 and March 2013. However, if your employer would like to join the scheme by March they must apply by the end of December. To be accepted into the pilot, employers must be using RTI compliant software. Not all payroll software providers have upgraded their software to meet the RTI criteria so it is essential that you speak to your software provider.
If an organisation operates a payroll of 5,000 or more employees or pensioners then they needed to join RTI either prior to April 2013 or from June 2013. The months of April and May are being reserved for smaller employers.
Originally, all employers had to be using RTI by October 2013, to coincide with the introduction of Universal Credits. However, on 28 September 2012 HMRC announced that some employers, such as care and support employers, will have until April 2014 to start reporting RTI.
For further information on RTI please visit: www.hmrc.gov.uk/rti/index.htm
Nick Day comments “ RTI presents a significant challenge for payroll departments and no one really knows how it will affect payroll professionals, their roles and their careers. What is certain however, is that RTI represents the most significant change to the way payroll is implemented in it’s 60 year history and payroll professionals are rising to the challenge and doing everything they can to resource organisations to handle RTI.”