Ensure you are ready for changes to PAYE

Ensure you are ready for changes to PAYE

In April 2013 the way your payroll is run in the UK will undergo the biggest change since the introduction of PAYE in 1944.  Real Time Information (RTI), the new reform of how we report PAYE information to HM Revenue & Customs (HMRC) is fast approaching.  Some employers are already piloting the scheme although most employers will receive notification from HMRC to commence the scheme between April 2013 and October 2013.

The submission of these RTI reports to HMRC is mandatory and as with other taxes now, failure to comply will result in penalties being charged.

HMRC have introduced RTI to enable them to improve their administration of PAYE as well as supplying the details needed to calculate Universal Tax Credits.

How will RTI affect employers?

The key to a smooth transition is to prepare and cleanse the data held on the payroll software to ensure that your details match those held by HMRC for your business and your employees.

For most employers, you will submit your employee’s details for matching when you send the first Full Payment Submission (FPS). This will be on the first payment date after receiving your commencement letter from HMRC.

HMRC Alignment

This first submission will include lots of information including information regarding the employee, contracted hours of work, payment frequency, pay and deductions to date and much more.

It must also include every person paid or still employed since the beginning of the tax year, even if they have already left your employment. You also need to include those that are under the Lower earnings Limit (LEL).

Electronic reports

Each and every time a payment is made to any individuals a FPS will need to be sent electronically to HMRC detailing the gross pay, tax and NI deducted. From this HMRC will calculate what you will be paying them by the 19^th of the following month or quarter. You must also remember to indicate if an employee is not due any payments in any period.

If you have to reclaim and offset statutory deductions, or CIS deductions suffered or paid, an additional submission is required. This is called an Employers Payment Summary (EPS). You will also be required to send this report if there are no payments due for the period. This takes the place of the online nil payment return.

For starters and leavers you will not have to send P46’s or P45’s to HMRC, although you will still be required to ensure that you have them for each employee and enter the details to be included in the Full Payment Submission.

Other factors to consider are that there will no longer be a requirement to send some returns to HMRC at the end of the tax year.  The P38a (Employers Supplementary Return) will no longer be required because HMRC expect that every person receiving payment will be entered onto the payroll system at the time of payment.

Once RTI commences there will be no need to send a P35 or P14’s at the end of the tax year. P60’s will still be produced for every employee still employed at 5 April.

Article as printed in the Retford Times 10 January 2013.

Technical content correct at time of publishing.