Published: 14 May, 2012
Under current regulations, employers are required to submit a summary form to Her Majesty’s Revenue and Customs at the end of every tax year to tell them what they paid their employees. However, the system is now changing and something called Real Time Information (RTI) is being introduced. This means that once the system has been fully rolled out, all employers will have to inform HMRC every time their employees are paid.
This means that HR payroll software is going to play an even more important role in keeping HMRC informed about what is happening with the payroll of various companies. Currently, a pilot system has just been started where HMRC will work with a handful of companies to see how the new system works. They will be looking at companies of a range of sizes and that use different types of payroll software to see how they handle the changes.
By September 2012, the plan is to bring on board a further 1300 companies into the new system. It is thought a quarter of a million businesses will be making use of the new RTI system by March 2013. The plan is for all employers to make use of this system by October 2013, so between April and October next year, the companies that have not already joined the scheme will be required to adopt these new working practices. October 2013 has been given as the deadline due to the introduction of the government’s new system of Universal Credits.
The main changes under the RTI system are that at the same time as employees are paid, employers will be required to send information to HMRC about that pay. As a result of the new system, the previous forms that employers were required to submit at the end of the tax year (P14s for employees and the P35 summary form) will no longer be needed. However, the P45 and P46 forms will still be in operation, although they won’t have to be sent to HMRC any longer.
If employers offer benefits to their employees they will also still have to complete forms P11D, P9D and P11D(b). Tax and NIC contributions will also not be changing and employers will still be required to issue their employees and other relevant people with P60s as under the current system.
One important thing to note about the new RTI system is the Employer Alignment Submission, which is designed to align the data held by HMRC with the data held by employers of employee details. There are different forms available according to the size of the company, so it is important to get the right one for your business. For most businesses, once they have submitted the EAS and HMRC has updated their system, the employer will then be told to start using the RTI system. A key point of the EAS in comparison to the regular RTI submissions is that it must also include details of any employees who have started with or left a company during the relevant tax year.
All of this naturally has implications for HR and payroll software, so it is important that businesses check well in advance that the systems they currently have in place will be able to take account of the new RTI method. The payroll software suppliers should be able to make companies aware of this if they are unsure, or to suggest an alternative if it turns out the software is not compatible with the new system.
Small companies (with fewer than 9 employees) may well be able to use the free tools offered by HMRC to deal with the new system, but all other companies will need to ensure they have the right payroll system in place so that they can submit to HMRC every month (or whenever they pay their employees). If any firm fails to comply with the RTI system, they could end up facing penalties.
If a company is concerned about implementing the new system through their payroll software, they might like to consider HR and payroll courses to ensure they have all the relevant information and know how to operate the systems to ensure compliance. It is thought that more guidance is due to be released fairly soon with regards to the RTI system, so it is worth looking out for this too so that companies are fully briefed before they start to implement the new system. This is a change that will have a significant impact on the way payrolls operate, so taking the time to get it right is definitely important.