RTI – Real Time Information or Real Time Insolvency?

Recent press releases have highlighted potential issues that may arise when the new RTI (Real Time Information) for Payroll system is brought in by HMRC from 6th April 2013. In this article, Paul Palmer (Associate, Corporate Recovery and Insolvency) outlines another potentially more serious consequence of RTI that, as yet, remains under the radar. Namely, an increase in insolvencies:

Cash Rebate

Prior to RTI for Payroll, a company could determine its final PAYE/NIC liability to HMRC no later than 19th May after the end of the tax year (5th April) thereby delaying payment and improving cashflow over the previous 12 months. Some businesses may even underdeclare their monthly liability with a view to "catching up" after the end of the tax year.

This also meant that a Time To Pay ("TTP") scheme could be sought at that time.

However, RTI means that liabilities will be determined by the 19th of each month for the prior month (i.e. 6th April - 5th May liability will be known by HMRC no later than 19/5) and payments will be due immediately.

This will have a significant impact on cashflow requirements for businesses, which may lead those struggling to keep their heads above water, to instigate insolvency proceedings. Likewise, if these businesses don't pay, as and when payments fall due, this may lead to an increase in the number of winding up petitions being presented by HMRC.

It is unlikely that the previous leniency for TTP schemes will be allowed, as recent numbers entering the scheme shows a tougher approach by HMRC, possibly in anticipation of the RTI system being enforced.

Overall, the RTI system, coupled with changes in the Pension Regulations (Auto Enrolment), means some businesses will face a tough time over the forthcoming months/years.

For more information about Mitchell Charlesworth's Corporate Recovery & Insolvency services, contact Paul Palmer on tel: 0161 817 6100 or email: paul.palmer@mitchellcharlesworth.co.uk. Fundamentally, the sooner problems are treated, the better the prognosis as there are many options available to you before insolvency.

If you would like more information about Real Time Information for Payroll, contact our Director of Payroll Services, Ken Davies on tel: 0151 423 7500 or email ken.davies@mitchellcharlesworth.co.uk.

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