Are you ready? Real Time Information has been introduced by HMRC to improve the operation of Pay As You Earn. Whilst it might seem a daunting change, the key is in the preparation. Take steps now to make sure you don’t get caught out
It’s all in the preparation : operating PAYE in real time
From 6th April 2013 employers must now start reporting PAYE information to HMRC in real time – it’s the biggest change to income tax and National Insurance Contributions since PAYE was introduced in 1944!
What does PAYE in real time mean?
Employers (or your accountant, bookkeeper or payroll bureau) will have to:
• Send details to HMRC every time they pay an employee, at the time they pay them
• Use payroll software to send this information electronically as part of their routine payroll process
You’ll be pleased to hear that there’s no longer the need to submit end of year forms (P35 and P14) and even better, the starter and leaver process is simplified.
Pay as you go
One of the key parts of the new system is that where a payment is made to an employee, the return will identify precisely the PAYE and NIC payments due and these amounts will need to be settled in full by the due date each month. It might seem nothing new but there are hundreds of businesses each year that fall behind with these payments and going forward, there’s no longer anywhere to hide!
What’s fundamental to the new system is that HMRC requires that the returns must be on time and right first time. Correcting returns can be a complicated and lengthy process and not only may penalties arise, but it may trigger the worst thing of all, a full enquiry.
If having seen the changes you feel that the new system is not for you, then there are some great payroll bureaus out there that will take this off your hands and allow you to the time to focus your efforts elsewhere in your business.
Period of transition
That said, with any project of this gravity, it’s a huge relief to see the recent comments expressed by Ruth Owen (HM Revenue & Custom’s Director General Personal Taxation) emphasising that the first 12 months will very much be a period of transition and that they’ll be on hand to offer the help and support needed to make the change to PAYE reporting in real time.
It’s widely understood that accuracy is key. Whilst penalties for lateness will not be applied in the first instance (for 2012/13 if you’re in the Pilot, or 2013/14 otherwise) you are likely to face a fine if the data provided is inaccurate.
We’re RTI ready, are you? There’s a whole host of information available on the web and a lot that will have landed through your letter boxes as well. Here’s a handful of useful links worth browsing through:
• HMRC : RTI at a glance, what’s changing?
• HMRC : Preparing to operate PAYE in real time
• HMRC : What’s changed – PAYE in real time
• HMRC : Penalties, returns and payments for 2012-13 and 2013-14
• Paycheck : Being part of the Pilot scheme, all you need to know from one of the experts
How will Real Time Information impact the way in which you report to HMRC? Are you ready to “pay as you go”? Let us know how the changes will impact your business.
About the author
Kate Baker is a Manager at Ecovis Wingrave Yeats, Business Advisers and Chartered Accountants. Kate specialises in Media businesses and as a Firm they were voted Best Medium-Sized Firm of the Year.
Contact her at firstname.lastname@example.org or go to www.wingrave.co.uk