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RTI, designed to improve the operation of PAYE, is the biggest shake-up of the PAYE system since it was introduced in 1944.

Currently, if you employ anyone – even if it’s just yourself – and you operate PAYE, you must submit end of year returns (P35 and P14) or P38 supplementary returns to HMRC. 

However, from April 2013, instead of completing end of year returns, you will be required to submit details about employee pay and deductions, such as Income Tax and National Insurance contributions, to HMRC each time you pay an employee.

 

Whether you operate your payroll in-house or outsource to a payroll provider, you are responsible for ensuring that your payroll information is reported to HMRC electronically on or before each payday.

 

You will also need to submit starter and leaver dates if applicable. If an employee leaves your business, you will issue them with a P45 as usual but you will no longer need to send a P45 or P46 to HMRC.

Not all employers will start using reporting payroll information in real time in April 2013. Care and support employers, employers with religious objections to electronic communications and users of the special schemes for Examination Fees, Electoral Payments, Direct Payment and Direct Collection schemes will not begin reporting in real time until April 2014. In the meantime, care and support employers and certain religious groups will be able to file on paper in the usual way while a suitable real time, paper-filing system is developed.

 

It is hoped that the new way of reporting payroll information will lead to tax codes being updated more frequently and fewer underpayments and overpayments being made.

 

RTI will also support the operation of Universal Credit, a new benefit that aims to simplify and streamline the current welfare system by replacing five work-based benefits with one.

 

Got questions about how RTI will affect your business? Looking for a payroll service to take the extra administration off your hands? Contact Foremans LLP on 01244 625 500.