On 6 April 2013, HMRC’s new Real Time Information (RTI) rules for employers landed, and with it, extra administrative burden for businesses up and down the country.
With the exception of businesses with 9 employees or less, it is now necessary for all employers to incorporate an RTI ready software package into the way in which they run their payroll. This increase in reporting requirements is something that is not only an unwelcome time drain on business owners for whom time is likely to already be a precious commodity, it is also an opportunity for HMRC to profit in the way of late filing penalties for those business owners who are either not adhering to the new policies or are not fully prepared or educated on RTI.
So are you prepared?
Those who are prepared for the extra responsibilities that come as part and parcel of RTI will have already undergone a payroll cleansing exercise. The purpose of this exercise is to ensure that HMRC are in possession of certain key details for each employee on the business’s payroll.
The details that are required to be correct by the taxman are:
• Date of birth
• National Insurance Number
• Contracted hours (weekly or monthly)
The new RTI rules also mean that, for every payment made to employees, employers are required to file a Full Payment Submission (FPS) on every occasion. For example, staff paid weekly require a weekly filing and staff paid monthly require a monthly filing. Additionally, it’s also important to remember that a record of the number of hours each employee has worked within each given pay period is necessary to be included. Part time and casual employees are also to be included in the process, as information will have to be recorded for those paid below the National Insurance Lower earnings Limit.
What about those who are not prepared?
Whether your RTI processes are not in place due to a lack of preparation or you simply weren’t aware, late filing penalties will be enforced by HMRC as time progresses.
Whilst the penalties for filing inaccurate forms will not be applied during the 2012/13 tax year, they may be applied after the end of the tax year once the final FPS has been submitted. Production of year end forms P60 for employees and forms P35 and P14 for HMRC still apply as normal.
It’s not all doom and gloom though as HMRC announced they will not be charging penalties for late filing of FPS forms during the first two tax years.
What can you do if you are not prepared?
The simple solution to the conundrums that RTI throws up is to outsource your payroll. The novelty of RTI means that it not only presents the problem of on-going reporting responsibilities, some will have the issue of initially getting their head around the idea of RTI and also the initial set-up of processes to cope with the taxman’s demands. An outsourcing solution is something which can take away the headaches and ensure that your business obligates the orders of HMRC.
If you would like an informal chat regarding RTI, even if it is just questions or fact-finding, please do not hesitate to contact me on 0161 236 9077 or [email protected], or alternatively speak to any member of our Tax team.