Real Time Information

Posted by Sharon Yewen in Personal Finance on 16 November 2012 - Sharon is Financial Controller at checkmyfile.

HMRC is introducing a new way of reporting PAYE called Real Time Information (RTI). It means that employers must file PAYE information within 7 days or on the normal payroll date if earlier, changes must be reported as and when they occur, and there is no requirement therefore to complete annual returns of PAYE tax and NI.

Reporting in real time will be a legal requirement from April 2013.

According to HMRC, reporting in real time will make the PAYE process simpler because there will be no requirement for end of year P35s and P14s; it will make PAYE reporting more accurate for employees and reduce the number of bills and repayments sent after the end of the year; HMRC will be more able to pursue late payments; it will reduce the number of tax credit errors and frauds; it will support the payment of Universal credits without individuals having to supply the information to the Department of Work and Pensions.

The Institute of Chartered Accountants in England and Wales (ICAEW) has its concerns though and thinks that the new system will be impossible for many businesses to implement. The head of the ICAEW tax faculty, Frank Haskew, says that he is “….particularly concerned about the impact this will have on smaller businesses.” Chairman Paul Aplin adds,“The proposed rules do not take account of the real world”.

There are likely to be extra burdens placed on small businesses who, for example, take on additional casual help in busy periods: they will have to report weekly instead of monthly. It could also create difficulties for payroll agents who struggle to obtain information from clients about any changes on a weekly basis.

Again it looks like a potential cost saving exercise by HMRC who are set to gain more revenue in fines when taxpayers are unable to meet the deadlines.

HMRC on the other hand is enthusiastic about the new system and have been piloting RTI PAYE since April 2012. It has found that “Reporting in real time is straight forward for the majority of employers and improves the operation of the PAYE system.” HMRC goes on to say, “We recognise the real time reporting requirements will create genuine difficulties for some employers, which is why we have agreed an easement in which reporting can be done within 7 days of employees being paid...”

It remains to be seen whether the transition will be smooth or not!

Sharon Yewen is Financial Controller at Checkmyfile. She is an FCA and has a degree in accountancy from the University of Exeter. You can contact Sharon at sharon.yewen@checkmyfile.com

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