Real Time Information (RTI) explained
From April 2013 the biggest change to payroll procedures for over 60 years comes into force. Employers and pension providers will need to file payroll information online to HMRC every time a payment subject to statutory deductions is made. Payroll software will simply collect the information and send it to HMRC online. This should be considered as important as filing VAT returns online as once RTI begins, failure to submit your PAYE data to HMRC on time may incur penalties. Even if the salary or director’s fee you take is relatively small, the payroll has to be compliant with RTI. Even if your business is dormant RTI returns must be provided.
This change is compulsory. The vast majority of employers will be making PAYE returns in real time from April 2013, and all employers will be routinely reporting information in real time before October 2013. HMRC will confirm to you in writing when you are expected to submit returns from.
We also have free guides to RTI that you can download if you would like more information:
RTI Guide - Running your own accounts RTI Guide - Using a high street accountant
Three important changes when RTI is implemented
- Information must be sent to HMRC about an employee’s salary and associated deductions before, or at the same time, the payment is made using Full Payment Submission (FPS).
- There is no longer the requirement to submit P14s for employees or to submit a P35 summary and employers declaration.
- P45 and P46 (new starter forms) will be retained by employers but employers are not required to submit them to HMRC.
The areas that won’t change for PAYE under RTI
- Employers will still have to issue P60s to employees.
- Benefits In Kind is not included under RTI. As an employer you will still be required to submit P11D, P11D(b) and P9D forms where applicable after the end of each tax year.
- The way in which HMRC calculate income tax and National Insurance Contributions remains the same as well as how payments are made to HMRC.
RTI implications for you
RTI may be a relatively painless transition if you have the right support in place. It can be a challenge however, if you’re doing your own accounts and using non-compliant accounting software or spreadsheets to calculate payroll returns.
These changes are something you need to be aware of, as you are the employer and the employee in your limited company. If you are a Brookson customer we will continue to prepare your payroll and make the submissions to HMRC. All relevant payments will automatically be submitted to HMRC.
You will still receive a pay slip weekly in Connect, showing the payroll deductions, expenses processed and the amount submitted to HMRC. As the information is reported weekly you will need to ensure that you update Brookson when you don’t want to take a salary, for example, during periods of non-trade or if you are claiming statutory payments.
Brookson has already made the necessary investment in systems fully compliant with HMRC’s requirements, ensuring its contractors and freelancers working through limited companies will not need to do anything further.