Frequently asked questions about Real Time Information (RTI)
What will RTI do?
Using RTI, employers and pension providers will tell HMRC about tax, National Insurance contributions (NICs) and other deductions when or before the payments are made, instead of waiting until after the end of the tax year.
- make the PAYE process simpler and less burdensome for employers and HMRC; for example by removing the need for the end of year return (P35 and P14) and simplifying the employee starter and leaver process
- make PAYE more accurate for individuals, over time reducing the number of bills and repayments sent after the end of the tax year
- enable HMRC to pursue late payments more effectively
- support the payments of Universal Credits
- reduce Tax Credits error and fraud
Why change the PAYE system?
RTI will enable HMRC to improve the way that the PAYE system operates and builds on the work already done with the introduction of the National Insurance and PAYE service (NPS). Under the current PAYE system employers tell HMRC what deductions they have made from employees pay after the end of the tax year. Only then are HMRC able to review whether the correct deductions have been made under PAYE.
With RTI, HMRC will be receiving information when, or before payments are made and will be better able to ensure the correct deductions are made from pay. This will mean more employees will pay the right amount of tax and NI in the tax year.
How will RTI be less of a burden?
RTI reporting will become an integral part of an employer's normal payroll activity. When employers run their payroll the payroll software will gather the information required and send it to HMRC. This will be done using the internet through the Government Gateway or by using Electronic Data Interchange (EDI) on or before the date payment is made.
There will be transitional costs of introducing RTI but analysis indicates the system will be cheaper for employers and HMRC to operate once bedded in.
For HMRC it will mean that there are fewer individual customer records needing an end of year recalculation to determine what underpayments or overpayments have arisen.
Does RTI apply to the self employed?
No it is for the operation of PAYE only.
When will RTI happen?
Employers and pension providers will begin to use the RTI service in the period April 2013 to October 2013. All employers will be using the RTI service by October 2013.
Can I opt out of RTI?
No, unless the company ceases trading. This is a mandatory change and all employers will be required to comply with RTI. Failure to do so, will result in penalties and possibly prosecution.
How will I know when RTI applies to my company?
HMRC will write to you to confirm when RTI applies to your company, however it is possible to opt in to RTI in advance.
What, if anything, should I being doing to prepare for RTI?
Before any company can report using RTI, all PAYE schemes must undergo employer alignment. This means all payroll data currently held will need to be checked and verified. HMRC has issued guidance on the format of data to be provided to ensure it is not rejected on submission. We would therefore recommend that you start to undertake a cleansing exercise of your data, in advance of April.
Will end of year returns be needed using RTI?
No, end of year returns such as P35, P14 or supplementary returns (P38a) will be got rid of as all payments will be made to HMRC throughout the year each time a payroll is run.
Can I continue to process the payroll manually?
No. Data will have to be sent online to HMRC before or at the time the payment is made.
If you are a small employer (with nine or fewer employees) you can use the free HMRC basic PAYE tools package or a commercial payroll software package. Alternatively Prime Paysolve can fulfill your payroll requirements on your behalf.
How will I report using RTI?
Using RTI employers and pension providers will send HMRC a 'Full Payment Submission' (FPS) detailing tax, NICs and other deductions when or before the payroll is run.
What is included in a FPS?
For the first FPS, employers should include all employees who have been employed during the current tax year, including starters and leavers, or those that have not yet received a payment in the relevant period.
If they prefer, employers can submit this FPS for each 'part' of their payroll, for example one first FPS for weekly pay; one for monthly and a separate for leavers.
The first FPS should also include the hours normally worked, that is, the number of hours a person is expected or regularly works in a week.
How will subsequent FPSs differ from the first?
The first FPS must show all employees who have been employed with you during the current tax year, even if they have left or have not been paid in this period.
The second and subsequent FPss will only contain pay and deduction details for those employees paid on that payday. You don't need to include employees that are not being paid.
What is an Employer Payment Summary (EPS)?
An employer payment summary (EPS) can be sent if:
- no payments are made to any employees in a tax month
- you want to recover statutory payments, NICs compensation on statutory payments, Construction Industry Scheme (CIS) deductions suffered (limited companies only) or an amount under the Regional National Insurance Contributions Holiday for new businesses (NIC holiday).
When do I send the EPS?
If you want the deduction to apply to a specific tax month, you'll need to send the EPS by the 19th of the following tax month.
How will I know whether I need to submit an EAS or first FPS to complete Payroll Alignment?
You will need to submit and EAS if:
- you have a large PAYE scheme with over 250 employees
- your PAYE scheme is split because you have different payroll providers, two or more payroll systems e.g. monthly and weekly
- you can't make a single FPS submission because of broadband width restrictions
If you PAYE scheme does not fall within the above you will submit your employee details for payroll alignment when you send your first FPS.
Will I have to make a RTI submission even if I haven't paid anyone?
If no payments are made within a pay period, an EPS should be submitted to indicate 'no payment due' as no employees or subscontractors paid in this pay period'.
I normally pay HMRC quarterly. If no payment is due to HMRC for a particular month in that quarter, what should I submit (if anything)?
If you are classed as a quarterly payer, you must submit either an FPS or EPS showing 'no paymnets are due this month' for every month for which you have no payments due. If you do not, then HMRC will specify an amount due, and pursue this at the end of the relevant quarter.
I normally pay HMRC quarterly, however I run a monthly payroll - do I now need to pay HMRC monthly or can I continue to pay quarterly?
You can continue to pay HMRC quarterly, however you will have to send your FPS submission monthly.
What will I need to do when a new employee starts?
Using RTI employers will be required to ask new employees a series of questions - similar to the current P46 questions - depending on whether the employee has a P45 from their previous employer to establish the correct tax code to apply.
Where the employee supplies a P45 the employer should use the tax code and previous pay and tax details to calculate the tax to be deducted (as they would now). The code from the P45 should be included on the FPS with the answers to the P46 questions, but the pay and tax from previous employment should not be included.
Please note that employers who are filing RTI should not send forms P45 or P46 to HMRC as the starter and leaver details will be reported to HMRC as part of their normal RTI submissions.
If you have any other questions, or wish to discuss your payroll requirements, please do not hesitate to contact Kerrie Lucas on 024 7651 8567.