UK: RTI Update

From our previous communications, you know that HMRC is introducing a Real Time Information (RTI) system for reporting payroll information.  This plan is intended to simplify the operation of PAYE and make it more accurate. Most employers will be switched over to RTI by April 2013 (HMRC will inform employers of their schedule) and by October 2013 all will have completed the transition.

What's Changing?
The PAYE reporting process is changing, not the operation of PAYE itself. Under RTI, all employers and pension providers will tell HMRC about PAYE payments and deductions every time they are made, at (or before) the time they are made.  PAYE information, including details of employee work hours will be collected via payroll software and sent to HMRC electronically in the form of a “full payment submission” (FPS) sent through the government gateway or EDI.  Currently, this reporting is done at the end of year.

Employers will no longer have to make End of Year Returns (P35, P14 or P38A), though they will still have to give employees a form P60 and report expenses and benefits in kind on forms P11D (as they do now). Employers will also no longer be required to complete or send form P45 to HMRC when an employee leaves, or form P46 when an employee joins.

What stays the same?
Calculation of PAYE, deductions from payments and the frequency of payments to HMRC of PAYE and NICs will stay the same. As mentioned, employers will still have to provide each employee with a P60, report expenses and benefits on form P11D and pay Class 1A NICs using form P11D(b), provide leavers with a form P45 to be given to a new employer and for the employee’s records and obtain P46 type information from new starters.   

Employers who are submitting RTI returns should note that P45s and P46s should not be sent to HMRC. Starter and leaver information will be reported by employers as part of their normal RTI submissions.

Final note
It's important to note that RTI will enable HMRC to issue PAYE penalty notices for late monthly payments as soon as a penalty occurs.  Currently, such notices are issued only after the end of the year when it is too late for employers to correct any errors.