Real Time Information
Real Time Information is a new way of reporting PAYE information to HM Revenue and Customs (HMRC). Previously employers who had at least one employee that required payroll deductions needed to fill out an Employer Annual Return at the end of each tax year. This return was designed to keep HMRC up to date with all of your employee payment details and required you to fill out a number of forms.
From 6 April 2013 this system was replaced with Real Time Information (RTI). Now employers need to report PAYE information as and when employees are paid. This change has affected almost all employers and is designed to streamline the process and increase accuracy of information.
What is RTI?
Real Time Information is simply a way of keeping HMRC informed of your employees' PAYE information. Rather than collating all of your employee pay details into one return at the end of each tax year, the system now requires you to update HMRC every time you pay your employees.
The idea behind the system is to make it as easy as possible for HMRC to maintain accurate records. Of course, the aim is also to make things easier for you as an employer; rather than taking on the laborious task of putting together 12 months worth of data in one return, RTI allows you to keep HMRC up to date as you go along.
Why has the process changed?
When PAYE was introduced almost 70 years ago, most people had the same job for all of their life. Because of this there were few changes regarding pay details and sending tax information annually made sense. These days however, people change their jobs more frequently and may even have more than one employer. This makes it tough for HMRC to keep data up to date.
RTI allows HMRC to keep more accurate records and over time this should lead to more people paying the correct tax. It is estimated that RTI will reduce administrative burdens on business by £300 million a year.
Does it affect me?
All employers should now be reporting PAYE information in real time, unless you have an agreement with HMRC to start at a later date. Existing employers with less than nine employees may have required more time to adapt and therefore can continue reporting through Employer Annual Return until April 2016.
HMRC should have given you plenty of warning about the changes, but if you are unsure whether you are reporting correctly - do get in touch to avoid any penalties.
What information do I need to send?
There are a number of submission types that make up the RTI filing and these include the Full Payment Submission (FPS) and the Employer Payment Summary (EPS). Typical information that HMRC will need to know includes the following:
- how much you have paid your employee(s)
- starter and leaver dates (if applicable)
- deductions such as National Insurance contributions and Income Tax.
You also need to include details of all employees you pay; this includes those who earn below the NICs Lower Earnings Limit (for example students). In a change from the previous return, you no longer need to submit end-of-year forms P14 and P35. You do still need to give your employees a P45 when they leave, however you no longer need to send part 1 of the P45 or P46 to HMRC. All of your starter and leaver information must now be sent via RTI every time you pay someone.
Full Payment Submission (FPS)
This is the main submission type you'll be sending every time you pay your employees. This means if you pay your employees monthly, you'll send 12 FPS submissions and if you pay them weekly, you'll send 52 FPS submissions.
The FPS includes a number of details, including your employees tax code, gross pay, sick pay, tax deducted, NIC, student loans and parenting pay (if applicable) along with their year-to-date figures. These submissions will also contain information about any employees that have joined or left your company since the previous pay period.
Employer Payment Summary (EPS)
If you have had any statutory payments to recover (for example maternity pay or sick pay) during a PAYE month, or have suffered any Construction Industry Scheme deductions, then you will have to report this information via the Employer Payment Summary. This is sent as necessary on a monthly basis.
You will also be required to send an EPS if there are no FPS returns during a particular month. The submission should also be made before your monthly or quarterly payment is due.
When do I need to submit the information?
You will need to send your information on or before the day you pay your employees.
How can an accountant help?
If you wish to maintain your own accounts and submit your RTI returns independently, you are within your rights to do so. If you decide to do this you will find lots of support available to you through the HMRC website. For some however, maintaining their own accounts can be a stressful and complicated process.
If you submit information that is incorrect, incomplete or late - you could face hefty penalties. Inaccurate data can also lead to employers making important decisions based on incorrect figures.
Contracting a qualified accountant will of course mean spending more money, but it is worth considering the benefits - both financial and non-financial. In the long-term an accountant could help your business save money by ensuring costly mistakes are avoided and offering guidance on the most tax efficient way to work. By keeping the accounts up to date, you will be able to make more informed decisions as an employer.
Working with an accountant ensures your accounts are accurate, up to date and reported correctly, lifting a huge burden of responsibility from your shoulders. Having this side of things taken care of frees up your time and allows you to concentrate on what you do best - run your business.
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