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Is your payroll ready for RTI?
October 12, 2012
Over the next few months, three little letters, RTI, are going to be big news for any companies that pay employees through PAYE. Significant changes are being made to the PAYE system - perhaps the biggest since it was introduced in 1944.
RTI stands for Real Time Information, and it signals a change in the way your business reports payroll data to HMRC.
Instead of filing payroll returns once a year, from April 2013 most companies will be required to submit payroll data to HMRC every time they run payroll. No matter whether you pay your employees weekly, fortnightly, monthly or once in a blue moon, RTI means that when you run payroll you'll be expected to send the details electronically to HMRC.
Why RTI payroll?
PAYE hasn't kept up with recent changes in working patterns. These days, many people people switch jobs more frequently or do more than one job at once. When payroll data is only reported to HMRC once a year, it's not uncommon for people to end up paying the wrong amount of tax.
Under RTI, HMRC will have access to much more recent information. This should drastically reduce problems, making things easier for everyone involved.
Getting ready for RTI
RTI payroll software includes: |
It's not up to you whether you decide to adopt RTI payroll. Legislation says all businesses with fewer than 5,000 employees must start using it in April 2013. With a few months still to go, now is a really good time to think about how you'll implement it.
You will probably need to make some changes to how you run payroll in order to accommodate RTI. Because RTI data must be submitted electronically, you need to use a payroll service or payroll software that can do this.
It's also very important your employee data is accurate. Before you start using RTI, HMRC will match your employee list with its own records, to ensure payroll information is recorded correctly. Any initial problems are likely to be related to mismatched names, dates of birth or National Insurance numbers.
RTI ready packages
Payroll packages like IRIS, Payroo (both free, at least for basic functions), QuickBooks and Sage will all be able to send data to HMRC under RTI before April next year. If you rely on an accountant or outsourcing service instead of doing payroll in-house, make sure they're up to speed with the changes and will be ready to go next April.
If it all works out, submitting RTI data should be as simple as clicking a button during your payroll process. In fact, because RTI means no more year-end returns, and no need to tell HRMC every time an employee starts or leaves (RTI sends all this information for you), it should actually save you time.
HMRC will let you know when you need to move to RTI. But it's going to happen to virtually every company in the next few months, so it'll pay to prepare now.
- Get ready for RTI
- One in three small firms unaware of payroll changes
- Will RTI benefit your business?
(Image: Flickr user dennis under Creative Commons.)
Will Real Time Information for Payroll help your business?
April 16, 2012
HMRC is planning to make the PAYE system more accurate. Its aims seem reasonable: it’s looking to drastically reduce the number of corrections it has to make for overpayment and underpayment. And it wants to slash the possibility of fraud. Sounds it should save us all a bit of money.
However, to achieve these aims, HMRC is making changes to how businesses supply them with payroll information. Currently, you only have to submit payroll returns once a year. Under the new system, you’ll have to do it every time you pay your employees.
The new system is called Real Time Information for Payroll (RTI) and it’ll be introduced from April next year**.
A PAYE admin nightmare?
It’s easy to see why this idea is attractive to HMRC. They receive up-to-date information each time you run payroll – they don’t have to wait a year between submissions. But at first glance this sounds like it could create lots more work for your average business.
If you pay employees weekly and monthly then you could end up submitting payroll information 52 times a year. Isn’t that going to be an admin nightmare?
Well, on reflection I think it might not be quite as bad as it sounds. Sure, the new system is going to take some adjusting too (it’ll become compulsory by October next year), but the benefits could be felt way beyond the world of payroll.
Reduce the stress of year-end
Payroll year-end can be really stressful. Wading back through a year’s worth of data, reconciling reports, tracking down needle-in-a-haystack errors, trying to figure out when on earth you did ten months earlier … it might only happen annually, but for many businesses it’s a disruptive and confusing time of the year.
On the other hand, if you got into the habit of submitting payroll information more often, it’s much easier to be sure that the information you’re submitting is accurate. And in fact, it’s not a stretch to imagine that if submitting a payroll return was just a standard part of your payroll procedure – and built in to your payroll software - it could be quick and easy every week.
Benefits for everyone?
Beyond payroll, imagine a world where you get the benefits you deserve and are entitled to. Imagine calling HMRC and them actually being able to resolve your queries faster because they have access to up-to-date information. RTI will help deliver this.
It’s for these reasons that I believe RTI is absolutely the right thing to do to drag us all - screaming and kicking, probably - into the 21st century.
You can become RTI ready and help shape how HMRC and Sage provide on-going help and support by getting involved in our pilot scheme. If you are interested simply register for the register for the RTI pilot online and we’ll be in touch.
** After this article was published, HMRC announced a "relaxation of reporting arrangements for small businesses". According to HMRC: "Until 5 October 2013, employers with fewer than 50 employees, who find it difficult to report every payment to employees at the time of payment, may send information to HMRC by the date of their regular payroll run but no later than the end of the tax month (5th)."
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