From the beginning of April you will be required to report your PAYE information to HMRC in real time. In practice this means that every time you make a payment to an employee, at the same time (or before) you will be required to make a PAYE submission to HMRC. In this article we look at the types of actions you can take to prepare your business for the changes RTI will bring.
The types of actions that you may need to take when preparing to report PAYE in real time will vary dependent upon your business. To help you decide what action your business may need to take, HMRC have produced a number of tools including a:
- Webinar ‘Get ready to operate PAYE in real time’ which provides additional guidance on preparing your business for RTI. You can find the link for the webinar at http://www.hmrc.gov.uk/payerti/getting-started/rti.htm
- Business Readiness Checklist – a printable checklist detailing preparatory actions you may need to take. This can be found at: http://www.hmrc.gov.uk/payerti/getting-started/business-readiness-checklist.pdf
The key actions you need to consider when preparing for RTI:
Payroll software or payroll bureau
To be able to report payroll information in real time you must have access to compatible payroll software or use an ‘RTI ready’ payroll provider. If you are dealing with payroll yourself then you must use either a commercial RTI-enabled software payroll package, or, if you have no more than nine employees you may be able to manage your payroll using HMRC’s Basic PAYE Tools software.
When the transition is made to real time reporting, all your PAYE information must be submitted electronically.
Check employee data is complete and correct
Before you start reporting in real time, you should check the accuracy of the employee data contained in your payroll records. Your first Full Payment Submission (FPS) will also be a payroll alignment submission, and it will be used to match your records to those held by HMRC. According to the HMRC website ‘over 80% of data quality problems are caused by holding incorrect information about an individual’s name, date of birth or National Insurance number’. HMRC provide a number of useful tips to help you check that your payroll data is complete and correct, and these can be found at:http://www.hmrc.gov.uk/rti/dip/get-payroll-right.htm#1.
To ensure that your employee data is accurate, you should verify it against an official source such as:
- HMRC and/or Department for Work and Pensions (DWP) documentation;
- birth certificate;
- full driving licence (photo version).In your first FPS, you will need to include information on all employees that have worked for you during the current tax year, even if they are no longer in your employment, or have not been paid in the period. You may need to take action to collate this additional information. Each subsequent FPS will only include details of employees actually receiving payment.You will only have to go through this matching process once, but it is a vital step. Your first FPS may be rejected if the employee data does not match to the individual records held by HMRC.
Check you are registered for PAYE online
If you are not already registered and you are responsible for your own payroll, then you will need a user ID and password for PAYE Online. You will need these login details when your payroll software sends your payroll reports to HMRC.
Start collecting new employee information in your payroll records
When you start to report your payroll in real time, you will need to include additional employee data in your submissions. This will include:
- the hours worked by the employee (reported in bands);
- passport number (UK and Non UK – though this is not mandatory);
- details of employees that have not reached the Lower Earnings Limit (LEL);
- indicating where employees aren’t paid regularly (e.g. maternity leave, or seasonal workers);
- new starters and leavers – these will no longer be reported separately but on your FPS.
You may need to change your data collection processes to ensure that you can collate this additional data.
If you use BACS
If you use a BACS Accredited Software Supplier (BASS) or a BACS accredited bureau service you will be affected by the changes. An additional four character reference, known as the RTI cross reference (hash) field must be added to your own service user number in the payment instruction.
HMRC have produced detailed guidance on the implications that RTI will have for users of BACS. This is available at: http://www.hmrc.gov.uk/rti/cross-reference.pdf.
Thinking about the implications for your payroll processes and taking preparatory actions in advance will help with a smooth transition to reporting payroll in real time. Once the transition to RTI has been made, it is hoped that the PAYE reporting process will be simpler and quicker both for employers and HMRC. We’d love to hear about your experiences, good or bad!