You’re Probably NOT Ready for RTIPosted by Tracy Baker on Sep 2, 2011 in Blog, Finance | 4 comments
Not heard about it? You’re not alone it would seem following a recent survey by SAGE UK. Over three quarters of small businesses in the UK haven’t even heard of HMRC’s Real-Time Information system which is scheduled to come into effect in 2013. So today I would like to explain what it’s about and how it will impact your business.
Ok so what IS RTI?
Put simply, the introduction of Real Time Information will mean “Employers will send HMRC information about tax and other deductions from employees pay when, or before, they make the salary or wage payment to the employee, rather than sending returns at the end of the year” according to information on the HMRC Website.
RTI is aimed at improving the operating of PAYE. HMRC argue that the PAYE system has remained largely unchanged since its introduction over 65 years ago and therefore they feel that some aspects of the system are no longer “fit for purpose”.
At the present time employers provide information about tax, ni contributions and other payroll deductions to HMRC at the end of each tax year and this results in HMRC not being able to correct mistakes until the employer sends this information to them.
However, under RTI employers will tell HMRC about tax, NI contributions and other deductions when or before the payments are made.
What’s the Big Idea?
RTI will (according to HMRC):
- Make the PAYE process simpler and less of a burden for employers
- Reduce HMRC costs and enable them to deal with non compliance ie late payments and debt collection, more effectively
- Make PAYE more accurate for individuals
- Reduce tax credits error and fraud
How does this effect my business?
Well, instead of sending the normal year end returns you will be required to provide the information when you do your regular pay run whether that is weekly, fortnightly or monthly. The due date for these payments is likely to remain unchanged, although there may well be a move to require electronic payment.
Many small employers do not use the BACS (Bankers’ Automated Clearing Services) to pay employers so, businesses with less than 50 staff, will initially be able to use software to submit RTI through the Government Gateway.
Finally, the introduction of RTI will mean either the simplification or abolishment of the P45 and P46 forms (new starters or leavers). Instead, HMRC will take responsible for dealing with company leavers and joiners, with only basic notifications from employers.
If you would like to know more …. HMRC’s consultation document outlining the proposed improvements to the PAYE system is available to download.
Had you heard of RTI? What do you think of the changes? Drop me a comment below and tell me what your thoughts are …..