Real time information (“RTI”) is the new system being introduced by HMRC to improve the administration of Pay as you Earn (“PAYE”).
Introduction
The current system has been in operation virtually unchanged since 1944. The Government has confirmed that RTI will be introduced from April 2012 and by October 2013 it will be mandatory for all businesses. Do you know what effect this will have on your business?
What is Real Time Information (RTI)
RTI is the new system for reporting pay, tax, National Insurance and other deductions to HMRC. The primary reason for the introduction of RTI is to support the universal credit which is a fundamental reform to the state benefits system. RTI will enable HMRC to collect information from employers about the deductions they make under PAYE at the time they pay their employees, rather than with the end-of-year- return.
How will RTI affect your business?
It is important to start preparing for RTI now. You need to consider how you run your payroll. Payroll software used will need to be capable of sending RTI submissions direct to HMRC so it will no longer be possible to operate a manual payroll system.
HMRC will require all employers to submit a ‘one off’ employee details report before commencing reporting under RTI. This report will require the following for all employees:
- Full name
- Date of birth
- Address
- NI Number
- Normal hours worked per week
Under RTI the information you submit to HMRC is matched against HMRC records and if the records don’t match this can result in incorrect tax calculations or HMRC compliance checks so it is important to check all employee data now.
A Full Payment Submission (“FPS”) will need to be made online at the time of every payroll run so for businesses that pay their employees weekly this will result in 52 or even 53 returns a year. Employers will be required to submit an Employer Payment Summary (“EPS”) to record any corrections to the FPS and record any Statutory Sick Pay or Construction Industry Scheme deductions.
It will no longer be necessary to submit a P14/P35 end of year return to HMRC and the procedures for starters and leavers will be simplified.
How can we help?
Magma has a dedicated payroll department and our software is RTI compliant so let us take the hassle of RTI away from you. Therefore those clients using our payroll services you do not need to worry. For anyone else let us assist you ensure you are RTI compliant.
We can process your payroll ensuring correct returns are filed online by the due dates therefore preventing unnecessary penalties. Alternatively we can undertake a review of your current payroll system and assist you to ensure it is RTI compliant.
Contact Us
For further information on real time information, or other payroll related matters, please contact us 01788 539000.
About Us
Magma is a leading firm of Chartered Accountants and Chartered Tax Advisers, providing a wide range of professional advisory services to owner managed businesses and private individuals. Magma thrives on its work with entrepreneurial businesses and their people. Magma works closely with its clients, delivering proactive and innovative advice. Our focus is on building long term relationships with our clients to help them and their businesses succeed, reduce taxation and create, increase and protect wealth. Magma offers a breadth of technical expertise and specialist advisers across six integrated service areas: Audit and Assurance, Business Services, Corporate Finance, Corporate and Business Tax, Private Client Tax and Wealth Management.
This document has been prepared as a general summary. It has been written for information purposes, should not be relied upon and is not a substitute for professional advice which should be sought. This document does not constitute taxation, financial planning or investment advice. Neither Magma Chartered Accountants or any of its employees accept any responsibility for loss or damage incurred as a result of acting or refraining from acting upon anything contained in or omitted from this document. Magma Chartered Accountants is the trading name of Magma Audit LLP, a limited liability partnership (Registered in England No. OC370086). Magma Audit LLP is a subsidiary of Magma Partners LLP (Registered in England No. OC370051). The registered office of both LLPs is: Bloxam Court, Corporation Street, Rugby, CV21 2DU. Registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales. Magma Partners LLP is registered with the Chartered Institute of Taxation as a firm of Chartered Tax Advisers. A list of members is available on request.