What is RTI?
RTI means employers will have to tell HMRC, via an online submission, what it is paying employees, including tax, National Insurance and other deductions, on or before the time they are made. In other words: giving a running commentary on pay.
Who will have to use RTI?
Nearly all employers will have to start using RTI at some point between April and October this year. HMRC will write 1.4 million letters in February to employers telling them when they need to start submitting RTI reports. Most businesses will have to upgrade their payroll software and employers with nine or fewer employees will be able to use HMRC’s free Basic PAYE Tools software for RTI reports.
Why is RTI being introduced?
In a nutshell, RTI will enable HMRC and DWP see and know everything about salaries and tax liabilities in real time. The move to real time is an attempt to solve a real problem: the billions of pounds lost to the tax and welfare systems through fraud and error every year.
It should make PAYE more efficient and ensure HMRC and DWP have up-to-date information about workers’ incomes, meaning the correct amount of benefit is paid to recipients of the new Universal Credit (UC) welfare system to be launched in October. The government claims RTI should generate savings of £300m a year from 2014/15.
How will employers provide RTI?
RTI reporting will become part of normal payroll activity; the crucial difference is that it has to be done on or before the payment date. Employers will issue a Full Payment Submission (FPS) through either the Government Gateway system or via Electronic Data Interchange (EDI) – at least until April 2014. In future BACS will also be used.
At the end of the tax year employers or pension providers will indicate which the last payment submission for the tax year is, provide each employee (or pensioner) with a P60, then complete P11D forms, as under existing arrangements. The smallest employers will be able to file employer returns online using free HMRC software.
Where employers can get help
ICAEW (Institute of Chartered Accountants in England and Wales) is a professional membership organisation, supporting over 140,000 Chartered Accountants around the world. ICAEW member firms have 21,167 offices in the UK supporting many thousands of businesses of all sectors and sizes.