Ann Stainer of Carbon Accountancy reveals everything the small business owner needs to know about getting ready for Real Time Information.
RTI (Real Time Information) is a change in the way payroll information is reported to HMRC. Instead of reporting at the end of the year via a P35 employers will have to send a report to HMRC electronically every time payroll is processed.
• Who will be affected?
From April 2013 most employers will be required to process their payroll using the RTI system. HMRC will notify you in writing four to six weeks before you are required to begin making RTI submissions. By October 2013 everyone will be reporting using RTI Submissions.
• How to report your payroll information in real time
You will need to purchase or upgrade your current system to support RTI (some systems are free). For up to nine employees you can use HMRC basic tools. You will need to register for PAYE services online and activate the service before you can start to submit your information. It can take up to seven days to receive an activation code in the post. Your payroll systems will need your login details to send payroll reports to HMRC.
• Employee information
You must ensure that the information you hold on your employees on your payroll system is accurate and matches the information held by HMRC. It is important to have the correct National Insurance number and date of birth. Full names (not initials) must be used and at least the first line of the address and post code. If there is missing information the submission will be rejected.
• Hours of work
The number of hours the employee is normally expected to work must be included in the submission. This is not the actual hours worked but, effectively, their weekly contractual hours.
• Unpaid leave
If an employee takes unpaid leave and has no salary in a payroll period you will need to enter an irregular payment indicator or HMRC will assume that the employee has left. This will also apply to casual workers.
• New starters
You will no longer need to submit a P45/P46 separately as this will automatically be submitted when you process payroll. However, you must still collect and keep employee personal information for at least two years. A P45 or P46 can still be used for this purpose.
You will no longer need to submit a P45 Part 1A to HMRC separately. Instead enter their leaving date on their payroll record and it will automatically be submitted next time you report your payroll information. You will still have to provide a P45 to the employee.
• When to report payroll information
Before you make your first FPS (Full Payment Submission) you must submit a one off EAS (Employer Alignment Submission). It is important to have all the information correct. HMRC will use this data to align and correct the records they hold for your employees.
You must submit your FPS (Full Payment Submission) on or before you make a payment to your employees. If the FPS is received by HMRC after the payment date then this will be deemed to be a late submission, which could then lead to the employer receiving a fine. Example: If you pay your employees on the 28th of the month then you must submit your payroll information by that date each month – if you pay your employees early in December for example, you will need to use the early payment date as the processing date and submit the FPS on or before that date.
• End-of-year reporting
You will no longer need to complete an end of year P35. However, you will have to indicate on your FPS (Full Payment Submission) that it is the final payroll submission for the year. You will still be required to complete the end of year declaration and questions and provide your employees with a P60.