PAYE and Real Time Information (page 2) 

To get ready to operate PAYE in real time, here are some things you now need to think about:

  • Having payroll software that will allow you to submit PAYE information in real time or getting a third party to do it for you
  • It’s essential that you arrange to either update your current payroll software or if you don’t use software at the moment that you get software which is capable of sending PAYE information in real time. You should do this as soon as possible.
  • Alternatively you might want to think about using a third party such as an agent,accountant or bureau to do the reporting for you.
  • If you use a commercial payroll software package, then speak to your provider now to ensure that your software will be able to process and submit PAYE information in real time.(Many pubs will have a small enough work force (i.e. under nine) so will be able to use  HMRC’s ‘Basic PAYE Tools’ – see above)
  • It’s also vital that you know what to do if you pay your employees directly into their bank accounts via the BACS system, using your unique ‘Service User Number’. If that’s the case, you will need to add a cross reference (or ‘hash’) into the payment instruction. This is so that HMRC can match the payments employees receive with the payroll data you report in real time.
  • When you take on a pub your business must be able to submit PAYE information in real time when required to do so. You must send this information electronically (not via email or by filling in a form on a web page) but by using software that can send your PAYE reports to HMRC directly and you’ll need an internet connection.

If you don’t want to handle your payroll and make PAYE returns yourself, you can get a third party to operate your payroll for you and to send the information to HMRC in real time (e.g. an agent, accountant or payroll bureau). If you decide to use a third party to operate your payroll (or you already use one) then they are responsible for making sure they are ready to report payroll information in real time. However, you still need to think about how this might affect you (especially if you provide them with relevant payroll and employee information). HMRC recommend you talk to your agent, accountant or payroll bureau now so that everything is ready in time for PAYE reporting in real time when you start your business.

Employee Information

Making sure employee data is complete and correct Providing HMRC with accurate employee information has always been important and will be even more so in future. Accurate information helps to make sure that your employees pay the right amount of tax and National Insurance contributions. It also helps to protect their entitlement to certain state benefits and State Pension. So, before starting to send information in real time, it’s essential you check that the data you hold in your payroll records is complete and accurate.

When HMRC talks about  ‘employee information’, they mean your employee’s personal details:

  • full name
  • date of birth
  • National Insurance number
  • gender
  • address

The information that HMRC holds about your employees must match what’s in your payroll records.

To check this, in the tax year that start real time reporting, you will need to supply to HMRC an extract of your records showing all individuals employed since the start of the tax year. This will include details of those who haven’t been paid and those who have left your employment.

HMRC will then compare this extract to the records they old and, where necessary, update their records to match the information supplied by you. HMRC will also  tell you about National Insurance numbers that need to be corrected. For example, if you have submitted an incorrect number for an employee and HMRC’s checks identify the correct one. This ‘Payroll Alignment’ process happens after HMRC send you an ‘invitation’ telling you when you need to start reporting your payroll information in real time. In most cases, you’ll submit your employee details for Payroll Alignment when you pay your employees and send in your first real time submission.

For real time reporting to work successfully, the information exchanged between you as an employer, pension providers and HMRC needs to be as ‘clean’ as possible. If it isn’t, HMRC will have difficulty in matching payroll details sent in to an individual’s tax and National Insurance records.

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