HMRC announced that, until 05 October 2013, employers with fewer than 50 employees who will have difficulty meeting the ‘on or before’ reporting requirement can report at the time of their regular payrun, as long as this is before the end of the tax Month (i.e. the 5th).
However, importantly, this only applies to employers who pay their employees weekly, or more frequently, but only process the payroll on a monthly basis. For example: An employer runs three restaurants with four employees in each. On a weekly basis, the manager of each of the restaurants pays staff a cash amount. On a monthly basis, the managers send these cash amounts to their accountant with the instruction to process a payroll for the 4 or 5 weeks in that tax Month. The accountants will process the gross pay that the 12 employees for the correct calculation of the tax, NICs and Student Loans liability. The net payments that have been made to the employees are deducted to leave a balancing net pay payment.
Before the easement, HMRC’s ‘on or before’ rules meant that the payroll would have to be processed on a weekly basis or, at least, more frequently than monthly. This would have resulted in a change of working practices for the employer and the accountants due to the increased frequency of the payrolls that had to be processed. Following the easement, such an employer can continue with the practice of the monthly payrolls up until the end of tax Month 06, i.e. ending 05 October 2013.
This is not a general easement for all employers with fewer than 50 employees. HMRC would still prefer real time reporting, though recognise that some employers with the above arrangements may take longer to adapt to this way of reporting. Another consideration is that it appears that the easement will cease to apply if, at any time in the period to 05 October 2013, the employer goes over the 50 employee threshold.
On 25 March 2013, HMRC published an update to their original guidance. They stress that this is not a withdrawal of the obligation to report in real time and, from 06 October 2013, all employers will be required to report this way each time they pay their employees. During the interim easement period (06 April to 05 October 2013), HMRC recommends that employers and agents ‘refine’ their business processes to allow for this. Software developers have been advised that they do not need to adapt their products to accommodate the easement.
On 22 March 2013, Stephen Timms, Work and Pensions Shadow Minister and MP for East Ham, asked David Gauke about the assessment of the ability for small firms to comply with the RTI on or before ruling. In reply, Mr Gauke, Exchequer Secretary to the Treasury, referred to the Tax Information and Impact Note (TIIN) issued by HMRC on 15 March 2013 that was updated specifically in regards to the impact that RTI will have on small businesses. This acknowledged that the burden of reporting in real time will fall disproportionality on smaller employers and some are expected to find the transition difficult. Whilst the TIIN says that small employers cannot be excluded from reporting in real time (due to the link between RTI and the Universal Credit), it recognises that they should not be disadvantaged. He then refers to the easement issued by HMRC and confirmed that HMRC have commissioned independent research looking at the impact of RTI on businesses, including small business. This will be used in conjunction with a wider evaluation of the RTI Pilot, due to report later in 2013.
This demonstrates that HMRC have listened to industry representations that have been made. The situation of weekly payments and regular payrolls is a common one and it is good to see that this has been recognised. Hopefully, this temporary measure will allow HMRC to fully realise the increased burden on the small employer and, possibly lead to a more permanent relaxation. It seems to me that regular monthly reporting by the 5th is better than the alternative of irregular reporting.
However, there is the larger picture of the Universal Credit to consider and the integral link it has with the reporting of real time earnings. One wonders if a relaxation of these regulations will be one of the things to come out of the summer review of RTI.
In addition, The Income Tax (Pay As You Earn) (Amendment) Regulations 2013 that have been laid before the House of Commons provides for a further relaxation on the reporting of earnings for casual employees who are paid non-electronically. The ‘on or before’ rule was relaxed in November 2012 for casual workers where it was impractical or impossible to report in real time payments for work that was done on the day. The original requirement was for the information to be reported at the earliest of:
the next ‘regular’ return the employer is required to send, or
seven days following the day on which the payment is made
This ‘exemption would have been ideal for employees, say, who are paid in cash at the end of each shift according to the number of hours they have worked. The employee tells the owner the number of hours and the manager gives them their wages out of the till at midnight, whilst still behind the bar.
The new requirement removes the reference to ‘next regular return’, meaning that the employer now has to report the payments in the next seven days rather than the next regular return, which may have been earlier.
Nick Day, Managing Director of JGA Recruitment adds “RTI presents significant challenges to organisations trying to comply with the legislation and implement RTI. The significant communications coming from HMRC are helpful but aren’t tailored to organisations who need clarity and a thorough understanding of their obligations when implementing new software and processes. JGA have witnessed an increase in pressure for payroll software providers to communicate to their customers and help them understand the implications for RTI. The JGA payroll recruitment team have seen an increase in demand for Payroll Administrators, Pension Administrators and Payroll Project Managers to help companies overcome the significant hurdles the need to overcome.”
Source: The Learn Centre