Warning to Unwitting Firms - Real Time Information: HMRC implementing radical change in payroll reporting procedures

Mitchell Charlesworth's Director of Payroll Services, Ken Davies, warns that HMRC is implementing a radical change in how payroll must be reported to their department - namely the introduction of Real Time Information (RTI).

Many businesses will not be aware of or prepared for this change.

Below you can answers to some of the most frequently asked questions regarding RTI and its implications for your business.

What is Real Time Information?

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  • HMRC are introducing in-year, Real Time Information (RTI), e-filing of payroll records from 2012.
  • Employers will submit RTI to support net payments made to each employee at the time each payment is instigated.
  • RTI would include personal details and PAYE/NIC calculations behind the payment.
  • RTI would see an end to forms P45 and inform HMRC of the employer's liability for PAYE/NIC with each pay run.
  • RTI will be submitted to HMRC via Government Gateway
  • BACS payments will include a hash reference to match RTI data.

What are the timescales involved?

From April 2012, a phased introduction of Real Time Information (RTI) will see employers efile payroll returns to HMRC at the time when payments credit employee's bank accounts.  By October 2013 all employers will have to submit under RTI.

In addition, HMRC have the option of issuing a direction to employers to commence RTI before that date.

Payroll data submitted under RTI will include all employees personal information and include details of their pay, tax, national insurance and net pay for that pay date.

What are Unique Payment References?

A random cross-reference (hash) will be required for each employee that receives payment via the BACS system.  The hash will be generated by payroll software at the time the payment file is produced.  The same hash will need to be included in the RTI submission to HMRC.  RTI will still be required even if payments are not made by BACS.

The hash will enable HMRC to corroborate the payroll data submitted to HMRC against the payment made to the individual.

This corroboration will assist the Department of Work and Pensions (DWP) with administrating Universal Credit.  In addition, HMRC will know the exact value of PAYE payable by the employer each month.

HMRC have put the onus on employers and BACS software providers to ensure that payments are submitted in a specific "Standard 18" format to include hashes through BACS.

A lot of the changes will be challenging for our clients and they may need a helping hand in being shown how to submit their RTI or import a payment file from their software rather than keying in individual amounts as they are used to.

In the meantime, the idea of RTI should be mentioned to clients;  "Will your payroll software be able to produces hashes?",  "Have you spoken to the bank about how you pay your staff?",  "Are your payroll records up to date?" 

What penalties could be imposed by HMRC?

While the advent of RTI will do away with separate processes for starters, leavers and Employer Annual Return Forms P35/P14, the penalty regime for late filing will get tougher.

In 2012-13, penalties for filing the final RTI submission of the year late will be the same as current penalties for filing a late P35.  

However, from 2013-14 penalties will apply for late filing of RTI data during the year.  Further legislation on those penalties will be published by HMRC in due course.

HMRC intend during future compliance visits to check whether employers are including hashes when making BACS payments.

Furthermore, it is expected that they will continue to focus on businesses who make payments by cash.

The latest consultation period closes for comments in January and phased introduction begins in April.

More information:

For more information on RTI or if you have a payroll enquiry, contact Ken Davies directly on tel: 0151 423 7500 or complete a quick enquiry form.

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