Real Time Information (RTI), the biggest shake up to payroll procedures since PAYE was introduced in the 1940’s, will become a reality for the majority of employers from April 2013.
Look out for a letter from HMRC inviting your PAYE scheme to join RTI, an invitation you cannot refuse! Let us know as soon as you receive your invitation so we can help you make the necessary transition.
The principal behind RTI is simple, HMRC want to know which employees are being paid, together with details of the deductions being made ‘on or before’ the payment is made to employees.
Here we primarily concentrate on the key submissions but do contact us regarding any questions concerning RTI.
Key submissions, what the submission contains and ‘top tips’:
Employer Alignment Submission (EAS) – Preparing for RTI
Although this submission is only compulsory for large employers or those with a complex payroll system, it is advisable for all employers. It provides HMRC with details of all employees employed in the current tax year including:
- full employee name
- date of birth
- national insurance number (NINO)
- full postal address (this is a mandatory field where the NINO is unknown)
Full Payment Submission (FPS) – Operating RTI
Used to report details of employees being paid for a particular pay period and provides details of their:
- statutory payments, such as Sick, Maternity and Paternity Pay
- income tax deductions
- national insurance contributions (NIC) (both employees and employers)
- student loan deductions
- starter and leaver information
Employer Payment Submission (EPS) – Operating RTI
This submission is used:
- where no employees were paid in the tax month
- where the employer has received advanced funding to cover statutory payments
- where statutory payments are recoverable (such as Sick, Maternity and Paternity Pay ) together with the NIC compensation payment if applicable
- where a NIC holiday is being claimed or
- where CIS deductions are suffered which could be offset (companies only)
Paying at the lower earnings limit for owner managed businesses
One of the issues that has been identified is that of owner managed businesses taking salaries to establish an earnings record for state pension and benefits purposes. It is important to ensure that employees are paid ‘at’ the lower earnings limit (LEL) or above.
Under RTI it will not be possible to put wages through the payroll at the year end of the business where these have actually been, or need to be, paid throughout the year, for example to utilize a family member’s LEL. Wages should instead be paid regularly and details provided to HMRC through the RTI system on a timely basis.
Where directors are paid annually, due to the special NIC annual earnings period which applies to directors, this salary may be paid in one lump sum at the year end.