RTI letters

HMRC is set to send out letters to every UK business that did not take part in its Real Time Information pilot, alerting them to the steps they must take to prepare for the biggest shake-up in the operation of PAYE for over 60 years.

RTI is a key element of the government’s plans to introduce a single benefit payment system in October 2013, which will be managed by the Department for Work and Pensions. The first real time submissions will be made in April 2013.

Under real time reporting, employers and pension providers – or agents, payroll bureaux and other intermediaries acting on their behalf – will send the taxman information about tax, National Insurance Contributions, student loans and other deductions each time they pay their employees. HMRC say this will help it to keep more accurate records and ensure more people pay the correct tax.

Steve Wade, employment tax director at KPMG in the UK, said he was concerned that while large employers were gearing up for the shift, smaller companies could be caught unawares.

Wade continued:

‘Many small and medium-sized businesses are likely to be blissfully unaware of this radical change. If they have up to date payroll software, hold current and accurate employee data and their software provider is gearing up for the more to real-time reporting then they may find that the transition is smooth. But if not, they are likely to face significant problems complying and may incur penalties.’

In July, the All-Party Parliamentary Taxation Group’s (APPTG) PAYE at the Crossroads report highlighted the challenges surrounding RTI implementation.

Its chairman, Ian Liddell-Grainger, said:

‘Progress has been made with the introduction of the National Insurance and PAYE Computer Service and will continue with Real Time Information (RTI) reporting. RTI is undoubtedly the biggest change to PAYE since its introduction back in 1944, but it should be regarded as a stepping-stone, not the final destination.’

‘Universal Credit makes it abundantly clear that PAYE is no longer just an HMRC issue, it’s a cross-governmental issue.’

The report acknowledges the solid work put in by HMRC but says some uncertainty still exists among the business community. It also says software costs that have to be borne by employers will be greater than initially anticipated.

More details are available from HMRC.