Recent research from the Federation of Small Businesses found that as many as a quarter of small businesses are still completely unaware of changes they will have to make to the way they report tax deductions. Do you understand Real Time Information and how it will affect your business?
We’ll be providing lots of help and information to help you get prepared over the next few months. This guide will give you an overview of what the changes mean for you and your business.
What is RTI?
Real Time Information (RTI) is a new initiative from HMRC to improve the administration of PAYE and to enhance the operation of the forthcoming Universal Credit scheme. It will begin from April 2013.
The calculation of income tax and National Insurance is not changing but the administration of the system is.
Essentially, whenever you run a payroll you will submit payroll information to HMRC at the time so they will know:
- who you paid;
- how much you paid them and;
- how much PAYE and National Insurance HMRC can expect to receive from you
Some employers will feel RTI puts them in an HMRC straitjacket, others will welcome submitting payroll data regularly during the year rather than annually.
However you feel about RTI, it’s coming towards you and it’s best to get organised now!
Getting organised for RTI
You, or your payroll provider, will need RTI-compliant software and software companies, including Intuit, are already using their products in HMRC’s RTI pilot scheme, ahead of general release.
Over the winter, the most important task is to gather the correct data for all your employees. The three pieces of data that cause most problems if they are incorrect are:
- date of birth and;
- National Insurance number
As the RTI-compliant software packages get switched on, you will be able to input all of the required data for each employee ahead of April 2013, but it won’t do any harm to start collecting it now.
The importance of accurate employee data
Each employer will have to make an employer alignment submission before or at the time of their first RTI filing.
You send HMRC your employee data and they will check it against the data they hold and update their records to agree to yours.
This can only be done once and cannot be amended – so gather and check the data now to ensure you are ready when the time comes.
Regular submissions of information
Every time you run a payroll under RTI you have to submit a Full Payment Submission (FPS) to HMRC.
FPS is at the heart of the Real Time Information system but your payroll software will submit it for you so in practice, provided you have got your payroll right, submitting the FPS should be very simple.
A typical FPS will include details of the following for each employee for the tax year to date:
- gross pay
- tax and NI deducted
- employer’s NI
- tax code
It also includes details of new starters and leavers. P45 and p46 forms remain in use under RTI, but they are not sent to HMRC because the Full Payment Submission will include the starter and leaver details.
In the event that you do not run a payroll for any given month, you will have to submit an Employer Payment Summary (EPS).
How RTI affects you
RTI is a huge change to a system that affects millions of employers, employees and pensioners in the UK.
Once RTI starts it will become imperative to get your payroll “right first time” and for many employers that will be where the real organisational pain is felt. But if you view RTI as an opportunity to improve payroll administration across the board then you will be fine.
The message is clear: Preparation can’t start soon enough.
QuickBooks and RTI
QuickBooks 2013 Payroll software is RTI-ready. RTI functions will be provided to all subscribers in early 2013.
Many of our users are already saving time by submitting RTI information from QuickBooks as part of the HMRC pilot. Find out more.