From April 6th 2013, Her Majesty’s Revenue & Customs (HMRC) introduced a radical change in the way employers handle and report PAYE for their employees.
The first thing to notice is that these new measures are mandatory so you have to implement them. As with all matters relating to PAYE you should consult your accountant or payroll provider.
The move to reporting information in real time is the biggest change to the operation of PAYE in over 60 years. Under real time reporting, employers and pension providers (or agents, payroll bureaux and other intermediaries acting on their behalf) will send HMRC information about tax, National Insurance Contributions (NICs), student loans and other deductions each time they pay their employees. This will enable HMRC to keep more accurate records and, over time, more people will pay the correct tax.
So what are the essential facts you need to know?
- Migration to reporting PAYE information in real time is mandatory
- Most employers and pension providers will move to reporting PAYE information in real time from April 2013
- HMRC write to you in October2012 to tell you what you need to do to get ready and then again in February 2013 to confirm the date from which you should start reporting PAYE information in real time
- Many employers already send PAYE information electronically and information reported in real time will also be sent online. Your payroll software (or agent’s software) will collect the necessary information and send it to HMRC online
- If you handle your own payroll you need to consider your options for payroll. A wide range of commercial software designed for real time reporting will be available from April 2013 to suit employers’ and pension providers’ individual requirements, including some free products.
- HMRC’s ‘Basic PAYE Tools’ will also be available for employers who have nine or fewer employees. You can get more information about this here
- You will need to include information in your Real Time Information (RTI) submissions about all employees
- HMRC will no longer require the end-of-year Employer Annual Return forms P35and P14, and you won’t need to send forms P45 and P46 to them; instead you will include this information with the information reported in real time.
- Employers making payments to their employees by Bacs, using their own service user number, will need to include a cross-reference in the RTI data submission and their Bacs payment instruction.
What will not change?
- The way tax and National Insurance contributions are calculated will not change
- You will still need to give employees certificates of tax and NICs paid – form P60
- You will still need to send expenses and benefits returns (P11D and P9D) annually
- The dates by which you must pay HMRC stay the same
You can find all the up to date information about RTI here
Getting ready to operate PAYE in real time
The following information is intended to help you think about things you need to do to prepare for the move. There are things you have to do and the sooner you start, the easier it will be. Even if you already have an understanding of the forthcoming changes, this guide may contain some timely reminders, as well as pointing you in the direction of more detailed information.
Between April 2013 and October 2013, for those employing less than 50 i.e. most pubs the changes will come into effect in April 2013. Nearly all employers and pension providers will start reporting payroll information to HMRC on or before every payday (instead of after the end of the tax year, as now). These reports will be made online using payroll software and you’ll no longer have to separately report new starters and leavers, or send in certain end-of-year forms.