Real Time Information (RTI) is a major change to the reporting requirements for the collection of tax and NIC under PAYE. Under RTI, the employer will be required to submit information; including details of earnings and the tax and NIC deducted each time a payment is made to an employee.
Characteristics of large employers
This article is about the issues facing “large” businesses. Large, for this article, is not merely about the number of employees and/or amount of tax and NIC deducted, but is being used to describe businesses with separate payroll and HR departments, dedicated payroll professionals, multiple payrolls, globally mobile employees, large numbers of leavers and joiners, computerised processes, separate IT departments, multiple benefit providers and/or share administrators etc.
Identifying the relevant stakeholders involved in payroll is vital to ensure that they communicate in time to meet the rigorous demands of RTI and to assess the full impact of RTI on the employer.
When will you join RTI?
All employers should be routinely submitting RTI data by October 2013. This deadline is looming and is unlikely to move. Large businesses, therefore, need to prepare for RTI now and, importantly, recognise it is more than just a payroll or software issue.
This deadline is looming and is unlikely to move
Assuming you are not already in, or joining the RTI pilot, the first question is when will you join?
HMRC will be contacting employers with over 5000 employees to arrange a joining date in advance of the October 2013 deadline, so that the commencement of RTI for such employers is staggered. Sensibly, HMRC do not wish all the very large employers join RTI in the same month. Other employers will receive an invitation to join RTI which will probably be issued in the new year.
If any employers will not be ready by their proposed joining date, they should contact HMRC as soon as possible to arrange a different date. It is possible to delay a joining date; however, failing to prepare is not a reasonable excuse for doing so and it cannot be later than October 2013! Obviously, you cannot join RTI until you have RTI compliant software.
RTI compliant software
For employers who outsource payroll procedures, the onus of reporting remains with the employer and not the payroll provider. Do you know what changes are needed to your current processes to provide all the data required “on or before” payment is made to the employee? What extra data will you need to provide to the bureau/agent and when?
If you do not know the answers to these questions, it is important talk to your bureau or agent.
Employers who have in-house payroll will need to communicate with their software provider and start asking the necessary questions, such as:
• When will the RTI compliant software be ready?
• How much will the new software cost?
• What training will be available?
Under RTI, employers are required to provide HMRC with data every time they pay an employee. A Full Payment Submission (“FPS”) may, therefore, be required more frequently than monthly, depending on the frequency of payments made. The challenge is not only ensuring that correct data is obtained for the first submission, but for every submission.
Bad data can cause an entire RTI submission to be rejected – not just the data about one employee. A data review is, therefore, a sensible step in preparing for RTI and this should identify any gaps in the information held. In particular, check that National Insurance Numbers are held for employees liable to NIC because the National Insurance number is used by HMRC to ensure the FPS information is allocated to the correct employee.
Employer Alignment Submission (EAS)
Employers with 250 or more employees will need to make an Employer Alignment Submission (EAS), to align their data with that held by HMRC, before they make their first FPS submission. The first FPS submission must include details for all employees who have been on the payroll in the year, even if they left the company before the first FPS submission date. All subsequent FPS submissions should only include details of employees who receive payments.
RTI is more than just a payroll or software issue
If employers join RTI after April, the first FPS will provide HMRC with details of year-to-date tax and NIC withheld. You should ensure that the FPS matches the payments already made and that all payments previously made have been correctly allocated using HMRC’s employer dashboard. Also, bear in mind that, with the withdrawal of the P35, if any amendments are required after the year end an Earlier Year Update will need to be filed.
It is vital that employers are able to provide HMRC with the relevant data for new joiners by the time of the first payment to ensure they have the required information to make RTI submissions, HR must be fully engaged to ensure the relevant information is collected. This may mean amending current procedures for new joiners; including, for example, seasonal workers in the run up to Christmas.
Businesses need to consider the timing of any off-payroll payments. An RTI submission is required at the point of payment and it could, therefore, prove problematic if employees receive daily payments with associated daily submissions. Employers may wish to consider the frequency of all payments in order to reduce the number of RTI submissions required each month.
Many employers find payrolling share incentives difficult. Multi-national organisations also find obtaining the information required to operate PAYE for globally mobile expatriates challenging. Unfortunately RTI will highlight any discrepancies and, therefore, employers need to ensure they obtain such details on a timely basis.
Repeated submission failure under RTI may be taken by HMRC as PAYE compliance failure, which could impact reporting under the senior accounting officer regime.
Under RTI late filing and late payment penalties will be issued automatically, with additional penalties for incorrect returns also applying. Further details on the penalty regime are expected before the issue of the draft finance bill on 11th December 2012.
Penalties are not, however, the only cost of RTI.
The cost of RTI
Implementing RTI is likely to incur additional costs for employers. These costs include:
• payroll or software systems upgrades,
• additional resource time required by HR to obtain the additional information required from employees,
• the time taken to undertake a payroll data cleanse to ensure that employers have ‘clean data’,
• process mapping, and additional training required for payroll staff
Employers need to ensure that they have accounted for these costs appropriately.
Steve Wade is director of international executive services, tax and pensions, at KPMG
Further articles in this RTI series will appear during the next couple of months, and will cover RTI for small to medium sized businesses, RTI for accountants/agents, penalties and RTI anomalies