For the latest updates on RTI visit out RTI Blog Section of the website
Senior Partner David Jones ACEA C’Dip AF
The Pay As You Earn (PAYE) has changed very little since it was introduced in 1944. PAYE is the way the employees pay Income Tax and National Insurance Contributions (NIC). Employers deduct the payments from employees’ pay each week or month.
PAYE, on the whole, is an effective system. However, it is prone to fraud and this makes it difficult for HMRC to identify errors or help either employers or employees to resolve problems quickly and efficiently, which is why RTI is being introduced.
What is RTI?
Real Time Information, or RTI, is a new system that HMRC is introducing to improve the operation of PAYE. PAYE information will be collected more regularly and more effectively as employer submit their regular payroll submissions, rather than their end-of-year tax return.
RTI means that employers will send data about PAYE, NIC and student loans every time they pay each employee.
RTI will be introduced from April 2013 and will become mandatory for all employers from October 2013.
HMRC will notify employers 4 to 6 weeks prior to when they must begin RTI submissions.
Why HMRC is introducing RTI?
- To enable a more efficient response to PAYE errors such as under or over payments.
- To support the introduction of Universal Credits, which will streamline benefits into one payment.
- To reduce fraud and to ensure people receive the benefits they’re entitled to.
- To provide the Department for Work and Pensions with up-to-date information about each claimant’s employment income efficiently.
It is vital that you familiarise yourself with RTI now and make sure you understand its impact on your payroll processes.
For a free no obligation conversation about your payroll needs contact Morgan Jones & Company
Preparing for RTI
RTI means that instead of sending information once a year to HMRC, you will send it every time you pay your employees. Information including PAYE details, NIC and student loans will be submitted electronically.
Make sure your Payroll data is accurate
RTI is fast-approaching. Now is the time to make sure the information you hold on your employees is accurate.
Under RTI, the information you submit to HMRC every time you pay your employees is matched against records HMRC stores in its National Insurance and PAYE Service (NPS).
Under RTI, employers submit information to HMRC every time they pay their employees.
The information is matched against HMRC records stored on the National Insurance and PAYE Service (NPS).
If there’s a mismatch between your information and HMRC’s records, duplicate or inaccurate records may be created, resulting in incorrect tax calculations or HMRC compliance checks.
Find out more about our Small Business Payroll Service
Avoid a mismatch on your Employee Records
To make sure you have the correct details for your employees, wherever possible, check the information you need against an official document such as:
- HMRC and/or Department of Work and Pensions documentation.
- Passport documentation.
- Birth certificate
If the employees cannot locate their National Insurance number, they can download Form CA5403 from the HMRC website, or they can phone the Registration Helpline on 0845 915 7006
If the employee has never been issued with a National Insurance number, they should phone Jobcentre Plus on 0845 600 0643.
For more information about getting your employees information correct in preparation for RTI, please visit hmrc.gov.uk/rti/dip/get-payroll-right.htm or Contact Us
Missing or incorrect data Employee Data
HMRC says that over 80% of data quality problems are connected to employers holding incorrect or inadequate information on employees, names, birth dates or National Insurance numbers. Currently, HMRC has on its records:
- 824 employees with surname “Unknown”
- 507 employees called A.N Other
- 160 surnames of “Test” and 100 with “Do not use”
- 128 staff entered Mr, Ms or Mrs “Dummy”
- Over 3000 employees with an NI number of AB123456 or AA111111
- 40 employees over the age of 200 years!
The Dos and Don’ts of Employee Information
Dos
Enter your clients’ Accounts Office Reference
Enter your clients’ full Company Name and Address
Enter your clients’ correct Tax District and Reference Number
Enter the correct date of birth and ensure it’s in the format DD/MM/YYYY
Enter employees’ full forenames and surnames
Enter a double barreled forename or surname in full
Only enter the employee’s correct National Insurance number
Don’ts
Enter a default date of birth such as 01/01/1901 or make one up
Use “known as” names, for example if an employee is known as Bob, you are still required to use his name in full- i.e Robert
Enter an initial in either the Forename or Surname boxes
Make up and employees National Insurance number
For a free no obligation conversation about your payroll needs contact Morgan Jones & Company
RTI The Big Four Submission Types
There are four main RTI Submission types.
Employer Alignment Submission (EAS)
What is it?
EAS is a one-off submission that will be used by HMRC to match and align company and employee records against the data it holds. Only businesses that employ more than 250 employees will submit RTI but small and medium sized employers can volunteer to submit EAS.
What type of information is submitted for RTI to the HMRC?
- Company PAYE reference
- Accounts Office Reference
- Tax Office number
- Employee name and address
- Employee NI number and tax code
- Employee payroll ID
- Employment start and end dates
When do I submit it?
EAS will be your first submission. You will submit when HMRC invite you to do so.
What should I do to prepare?
Ensure you have checked the accuracy of your employee data before submitting for every employee (include those who have left or haven’t been paid yet) from the start of the tax year
Full Payment Submission (FPS)
What is it?
FPS is the main and most common submission type. It covers the employee payments and deductions made each time an employer pays an employee. HMRC will use this submission to calculate how much PAYE and NIC liability is due from your business each tax month.
What type of information is submitted?
- Starter and leaver information
- Employee initial, forename and surname
- Employee NI number, tax code and gender
- Employee address
- Employee payment information
- PAYE and National Insurance contributions.
When do I submit it?
You must a Full Payment Submission every time you make a payment to an employee. The submission must be made on or before the date the employee is paid. If you process a mixture of weekly and monthly payrolls for your business, you must submit a FPS for each one.
What should I do to prepare?
If you’re a large employer employing more than 250 employees, you must make sure you have already submitted an Employer Alignment Submission.
If you’re a small employer and this is your first FPS submission, you must ensure that you’ve checked the accuracy of all your employee data before submitting.
Employer Payment Summary (EPS)
What is it?
HMRC will know via your regular FPS submissions how much your PAYE and NIC liability is. The EPS is only submitted where you need to advice HMRC of any alteration to this liability (such as when reclaiming statutory payments) or where you’re advising a nil payment.
What type of information is submitted?
- Whether no payment is due
- Statutory Payment Recovered#
- NIC Compensation on Statutory Payments
- Advance funding obtained from HMRC for tax refund and statutory payments
- CIS Deductions Suffered
- NIC Holiday
When do I submit it?
You should make this submission when or before the relevant monthly or quarterly liability payment is made to HMRC.
What should I do to prepare?
Firstly, you must identify whether you need to make this submission i.e whether you need to inform HMRC of any adjustments to your monthly or quarterly PAYE and NIC liability. If you DO need to make the submission, be sure to make it on or before the date the monthly or quarterly liability payment is due.
When do I submit it?
You can make an NVR submission at any time you need to validate, confirm or request an employee’s National Insurance number is correct or advise that the number should not be used.
What should I do to prepare?
Ensure the information the employee has provided, including their name, date of birth, gender and address is accurate. Do not make up or enter an invalid National Insurance number.
Changes to Payroll Year End
RTI will change the way Payroll Year End works. Although you will still be required to provide your employees with P60s and complete P11D and P11D(a) forms for taxable benefits and expenses, there will be some tasks you no longer need to complete.
- P14 and P35 submissions
- P38A returns for casual employees
David Jones is the Senior Partner and Founder of Morgan Jones & Company. Born in Liverpool and an Accountancy graduate of the University of Wolverhampton, David spent twenty years working for the Customs & Excise in London then Shrewsbury before starting his own business. David's depth of knowledge of the UK tax system and his ability to communicate this learning has seen Morgan Jones & Company grow into Shropshire's most respected Accountancy Practice.